Timely news, information and advice concentrating on FHA, VA and USDA residential mortgage lending.

Vimeo Channel YouTube Channel

FHA Loan Rules You Need To Know Before House Hunting

January 23, 2020

FHA Loan Rules You Need To Know Before House Hunting

There are several things you should know about FHA home loans before you go looking for real estate to buy. You can save a LOT of time and even some money by taking extra time to consider the following issues.

You Don’t Have To Buy An Existing Home

FHA home loans have an option called the One-Time Close construction loan. It lets you build a home from the ground up on your own land. Don’t want to purchase existing real estate?

There is an FHA home loan for that and it is offered even to first-time home buyers. The same low 3.5% minimum down payment is available to those who qualify with credit scores and other financials.

You Don’t Have To Buy A Suburban Home With An FHA Mortgage

Don’t be afraid to ask a participating FHA lender about FHA mobile home loans, FHA condo loans, and FHA loans for fixer-uppers (the 203(k) Rehabilitation Mortgage). You do not have to purchase a typical suburban house with an FHA loan, there are more flexible options under the FHA program

Buying A Second Home

In general, you can’t get two FHA loans at the same time. There ARE exceptions for situations that involve a work relocation, changes in family size, or even cases where the co-borrower on one loan wants to own a home in her own right with a new FHA mortgage.

In all cases, exceptions are handled on an individual basis. You may be required to provide supporting documentation, written statements, or other evidence that helps the lender justify the mortgage loan.

It’s best to come to the loan process with FICO scores that are as high as you can improve them ahead of time in any case but if you need to ask your lender to make an exception to FHA policy, this will help your cause.

You can begin working on your own credit repair by paying all bills on time, cutting your outgoing debt, and reducing your credit card balances. Believe it or not, missed payments are among the leading causes of credit trouble.

If you can take charge of your payment schedule for all financial obligations, you will get much closer to loan approval. It’s important to remember that improving credit takes time and you’ll need at least 12 consecutive months of on-time payments on your record for best results.

FHA home loan rules for second homes and investment properties are fairly straightforward; it’s the exceptions that can be confusing. Basically, if you want an FHA mortgage, you must be prepared to occupy the property you buy with one. It really is that simple.

Buying Investment Property With An FHA Mortgage

Investment properties as defined in the FHA loan rulebook are those the borrower does not intend to live in as a principal or secondary residence. 
And basically, those are not allowed under the FHA Single-Family home loan program.

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHA, VA and USDA Mortgages.  These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.

OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.

In addition, this is a partial list of the following homes/building styles that are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.

Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with a mortgage construction lender licensed in your area to contact you.

  1. Send your first and last name, e-mail address, and contact telephone number.
  2. Tell us the city and state of the proposed property.
  3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $1,000,000 and review higher loan amounts on a case by case basis.   If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Bruce Reichstein - FHA News Author

By Bruce Reichstein

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

Connect with Bruce:


Browse by Date:

About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

5850 San Felipe Suite #500, Houston, TX 77057 281-398-6111.
FHANewsBlog.com is privately funded and is not a government agency.

Share This