FHA New Construction Home Loans

FHA New Construction Home Loans

Construction Mortgages From FHA For California Properties

If you have chosen to build a new property instead of purchasing a resale, you may mistakenly assume that a conventional loan is the only alternative. You may be surprised to learn that FHA has options for construction! There are several notable differences between conventional and FHA construction mortgages. The following is a summary.

FHA Maximum Loan Limits

Loan limits differ for every type of program. For FHA, it is based on the particular county. It is important to find out the limits in your area in advance. The limits can fluctuate every year, so ask your loan consultant for correct limits.

Applicable Fees

The appraisal for an FHA mortgage is usually more than for other mortgages. The reason is that they must be FHA approved and the process is more involved. With new construction, appraisers must evaluate building plans to calculate a dollar amount. A follow-up inspection is also typical in order to check that the finished house is consistent with the specifications.

Many mortgage companies waive application fees. However, an application fee is required for an FHA construction mortgage. The amount may differ based on the style of property you are looking to construct.

Down Payment Requirements

The lowest down payment for FHA mortgages is 3.5%, as opposed to 5%-10% for conventional mortgages. Additionally, some of the funds required may be a gift from a relative. Paperwork in the form of a gift letter is usually required.


More documentation is usually necessary with an FHA construction mortgage. FHA processors want to perform their due diligence. As with any mortgage, lenders will also analyze your finances and credit history as well.

Additional Information on FHA Mortgage

FHA Mortgages were established to make buying properties more appealing. They are often a preferred option for a majority of first time home buyers. FHA construction mortgages require a litle more work than other mortgages but is a great option when constructing a new property. Speak with a mortgage professional for more detailed facts on this program and to find out if it is a good solution.