FHA Construction Loan

For most homeowners, getting a construction loan is one of the most difficult loans to obtain. You want to improve or have a major repair in your home but getting the loan is a dismaying task. Most of the time, people are just discouraged because they need to get two mortgages just to finance buying their house and home improvement projects. But with a FHA construction loan, you don't even need to get two separate loans. One would just be enough.

Most private lenders who give out conventional types of loan would require that you have to own the land on which your house is standing before you can obtain a housing loan. This is some sort of collateral so that if you fail to pay your loans, the lender has something to get to recover their capital. Some may forgo that requirement but would oblige you to pay premium that are often too much.

But in the case of FHA construction loan, lenders would just require you some documents to prove that you can pay the loan even if you don't own the house or the land as long as you are qualified.

Of course, before you start working on your home improvement or repair works, you need to set the budget straight. Lenders would not allow you to go over the amount you are borrowing just because there is an added expense. To avoid this you need to list down everything that you would need including all the labor costs that the work would incur. If you feel that you have been missing something, it wouldn't hurt if you consult the contractor that you would be hiring to check whether you have everything that you need included in the budget.

If you're still quite unsure, you may add some extra amount on your loan just in case the need for something that is not included in the budget arises. Although just make sure that this addition would not result to higher mortgage payments. That is why it is also important to discuss the plan with your desired contractor.

But you have to make sure first that your contractor is licensed for some lending companies requires the borrower to present a contractor that would have the necessary expertise and experience in doing the work. This is to make sure that the job would be finished on time and there would be no unnecessary events such as faulty work results.

This is very important because some mortgage lenders would require you to submit a budget plan and even the home improvement or repair plan prepared by the contractor and the necessary permits from the local government.

That would be the same for FHA construction loan. Although lenders won't require you to submit a budget plan for your project, you should keep in mind that the average maximum limit that states would allow is $35,000. As for your contractors, you don't need to find a licensed one as long as you can prove their expertise and experience in the type of job that you would be requiring them to do.


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