If you're ready to buy a home, but you'd rather build your own, you need to look into a low-down payment FHA construction loan. You may have thought that building your own home was out of your league, but not if you go with an FHA construction loan. This type of loan provides significant benefits for the home buyer looking to build their own home. If you're not sure how a low-down payment construction loan can help you, here are four benefits for you to consider.
Ensures Easier Qualification Process
When it comes to building your own home, the qualification process can be quite difficult, especially when you're trying to obtain a conventional home loan. That's where the FHA construction loan comes into play. One of the many benefits of this type of construction loan is that it comes with an easier qualification process. If your credit score is above a 620, you won't need to jump through nearly as many hoops as you would if you tried to obtain a conventional construction loan.
Provides for One Loan and One Closing
One of the problems associated with conventional construction loans is that they require multiple phases, and multiple loans. You'll first obtain a construction loan—which means an initial qualification process and closing fees. Once the home is built, you'll need to apply for the actual home loan—which means a second qualification process and additional closing fees. However, when you apply for an FHA construction loan, you'll go through one loan process—which means one qualification process and one set of closing fees.
Land Can Be Purchased at the Close of the Loan
If you're worried about finding the money to purchase the land for your new home construction, that can be easily taken care of when you take out an FHA construction loan. Once your construction loan closes, a portion of the money will be transferred to an escrow account. You'll be able to use that initial disbursement of funds to purchase the land for your new home. That means you won't need to worry about any out-of-pocket expense for the land.
Allows for Interest Only Payments During Construction
Now that you're thinking about building your own home, you may be worried about the cost of paying rent for the house that you're living in, plus a mortgage payment. When you take out a low-down payment FHA construction loan, you won't need to worry about that. While you'll still be paying rent for the home that you're living in now, you'll only be required to pay interest-only payments during the construction phase.
Share22 March 2018
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