If you have opted to construct a new home over buying an older property, you may assume that a conventional program is the only option. You may be pleased to know that FHA provides construction mortgages! There are many key differences between conventional and FHA construction mortgages. Below is some information.


More paperwork is normally necessary with an FHA construction mortgage. FHA processors want to complete their due diligence. As with any mortgage, lenders will closely look through your personal qualifications and credit history as well.

Appraisal & Application Fees

The appraisal for an FHA mortgage is often more costly than for other mortgages. The reason is that they must be FHA approved and the process is more time consuming. With a home that is not yet finished, appraisers must analyze information on the features and other building details to determine a value. An inspection prior to closing is also common in order to check that the house constructed is the same as the plans.

Some lenders do not charge an application fee. However, a fee is required for an FHA construction mortgage. The fee will differ depending on the style of property you are constructing.

Minimum Needed for Down Payment

The minimum down payment permitted for FHA mortgages is 3.5%, as opposed to 5%-10% for other mortgages. Additionally, relatives can gift money to help with the closing costs and down payment. Verification in the form of a gift letter might be requested.

Amount Borrowed

Loan limits vary for every kind of program. Limits also vary based on the location of the home. It is important to know the limits in your area beforehand. Inquire with a lender for updated facts as the limits can change yearly.

More About FHA Mortgage

FHA Mortgages were created to make buying properties more achievable. They have become a preferred alternative for many first time home buyers. FHA construction mortgages require a litle more work than other loans but is a helpful alternative for new homes. Call a mortgage consultant for more specific information on this program and to find out if you qualify.