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FHA Home Loan Options In 2024: Build, Buy, Or Wait?

January 17, 2024

FHA home loan advice

2024 may be the year more people think about owning a home thanks to anticipated lower mortgage rates and more homes for sale. Which option is best for you when finding a new place to live? There’s no one-size-fits-all answer, but some options are more tempting than others.

Renting Options If You Aren’t Ready Yet

Renting in 2024 may be an option to consider IF you are not quite ready to commit to a home. Borrowers sometimes underestimate how long it takes to get fully ready for a mortgage and if you are just now exploring your credit, lender options, and saving up for the down payment. 

However, some market watchers believe rental inventory may be lower this year, and there could be more competition for rental properties overall. 

Are you ready to house hunt? You may not have the same experiences in this area as those who are less prepared to sign a purchase agreement.

If you have to rent in 2024, expect the experience to be a different one this year compared to last year.

Buying Existing Construction Homes

This is the option for borrowers who may worry about qualifying for a conventional loan due to credit scores or credit history and need a more forgiving loan option.

It’s also good for those who are in the early stages of a career, who have finished college, or who have joined the workforce and have been working for at least 24 months. 

Buying an existing home using an FHA mortgage requires:

  1. A minimum 3.5% down payment
  2. FICO scores within the FHA and the lender’s range (580 or higher for the lowest down payment according to FHA guidelines)
  3. Occupancy
  4. A 3.5% down payment (the borrower is permitted to use down payment assistance.)

These are in addition to other FHA requirements and lender guidelines.

Down payment help is not available through the FHA, but state and local programs often feature an option to apply for a home loan with down payment grants, assistance in the form of forgivable loans, or related options.

You may not have such choices when applying for a construction loan, even if it is an FHA loan. Typically that’s due to lender requirements, as we’ll see below.

Build A Home From The Ground Up

FHA One-Time Close construction loans are what you apply for when you want to build on your own land. You can also use these loans to buy land in connection with the project, but you cannot use an FHA loan to buy raw land with no plan to develop it.

These loans feature similar FHA requirements as other loan programs, such as condo loans, manufactured home loans, and FHA 203(b) loans for existing construction.

But lender requirements apply here in ways they don’t for other FHA mortgages. One-Time Close borrowers are typically asked to pay more money down to have higher FICO scores than for other FHA loans for existing homes, and you are not allowed to use down payment assistance.

Construction loans require more from the borrower than purchase loans. You should consider talking to a participating FHA lender. Ask them to explain the cost differences and timelines of a construction loan compared to an FHA loan to buy an existing house to learn whether the option is best for you.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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