FHA Construction Loans in NC

We offer FHA Construction Loans in NC, and it’s a great option for those who have family land, or have purchased a lot that they want to build on.  We make the loan to the land owner, and we give the Builder a portion of the money with each phase of completed construction.

The Builder’s will need to be approved by us, and FHA requires that you make at least a 3.5% down payment for the total purchase of the home.  We do these FHA Construction Loans as a “one time close” and then at the completion of the home, we modify the loan into a permanent loan.

We also offer another type of FHA Construction Loans in NC. One is an end loan or Permanent Loan. An End loan is utilized when a builder agrees to provide their own financing to build the home and the client simply needs to have their loan approved for mortgage financing up-front. The builder then completes the home and the client goes to their mortgage lender to close on the transaction at the completion of their new home. We do these types of FHA Loans everyday.

FHA Construction Loans in NC

The FHA Construction Loan is locked up front, and will modify at the rate the loan was originally disclosed at when the home is complete.  Even if it takes six months to build your home, and rates move much higher, your note rate will not be affected.

Interest Only payments will be collected during the construction process, based upon the total balance advanced to the Builder. The Builder will receive funds at the time of closing (the beginning of the process) and then increments as the building progresses. The Interest Only payments during construction will be based upon the balance on the first of each month multiplied by the note rate.

If you own the lot that the home is being built on, FHA requires that the lot needs to be in your name for 6 months or LESS before we can close, and begin building.  If you’ve owned the lot for MORE than 6 months, FHA Construction Loans do not work. (It’s FHA policy)

Construction Specific Fees

The following fees will be applicable for the construction loan program:

• 1% origination fee.  This fee will be collected at the loan closing.
  The fee is fully refundable if the borrower proceeds with Equity Resources, Inc. for their permanent financing.
• $850 Construction Permanent Administration Fee
• $575 Processing fee
• $550 Underwriting fee
• $300 Modification fee
• $500‐$800‐ Title Updates during the construction process
  Typically, $100 +/‐ per update**
• $750‐ Inspection Fees during the construction process
  Typically, $150 +/‐ per inspection performed by the appraiser or an approved vendor.

Foundation surveys show the location of the foundation relative to the property lines. Easements of record shown and noted on the original plat are also shown on the foundation survey.  The cost of the survey is not something we can easily “estimate” the cost for.  If you have an acre lot, a 10 acre lot, or a quarter acre lot – the cost will be different.  It also varies based upon the terrain, and the “footprint” of the home.

Because of this, It is the borrower’s responsibility to determine these fees, prior to closing.  We ask that you contact your attorney – and have them help with this, as in NC the attorney generally chooses the Surveyor.  These fees can be only a couple of hundred dollars, or they could be over a thousand.

Qualifying for FHA Construction Loans in NC

With a FHA construction loan you will close on the mortgage before breaking ground.

• • Before funds are disbursed there is a final inspection to ensure the home meets all of the FHA housing standards.  This is one of the costs mentioned above.  There are 5 times during the construction of the house that we send someone out to check on it, and each time, we also update the title search to be certain no craftsmen have put a lien on the property because a Builder didn’t pay them.
  • The Mortgage Interest Rate is “Locked” at the time of closing on the Construction loan.  So, even if mortgage rates go up, you will not have a higher rate at the time of closing.
  • The maximum loan limits for FHA Construction Loans vary base upon the loan limit set for the county you are buying a home in.  In the Raleigh Area the maximum limit is $339,250 and in Charlotte, it’s $314,827.
  • The credit requirements for a construction loan is somewhat higher than a traditional FHA loan. We can go below 600 for traditional FHA Loans.  For the FHA Construction Loans in NC our minimum credit score is 660.  FHA recently tightened some of its credit score underwriting requirements, however, for FHA Construction Loans we have not found this to be an issue.
  • The Maximum Debt to Income Ratio for this loan is 45% – which is more conservative than typical FHA Loans.
  • The borrower needs to have at least 2 months of Reserves at closing – meaning if your monthly payment is $1000, then after making your down payment, and paying closing costs, we need for you to have at least $2000 left in the bank. For MOST Construction loans, you would be required to have at least 6 months of reserve payments, so this is a huge break!
  • We will also ask that you have a 5% contingency written in your contract with the builder.  As with all Construction loans, any “overages” meaning anything that costs more than you originally estimated, must be paid out of your pocket.  So having a “cushion” will be important!
  • If you currently own ONE home, you can get a FHA Construction Loan. However, you can’t own two homes with a FHA Loan on them, so if your current house has a FHA mortgage on it, you will need to sell that home, prior to taking out your FHA Construction Loan in NC.
  • You have to use a licensed builder/general contractor. Borrowers or relatives may not perform any repairs. No self-help allowed. Builder must be approved by Equity Resources, Inc.
  • Borrower Is not required to “re-qualify” at the time of conversion to permanent financing.
    
  • With FHA Loans, you can have a non-occupying co-borrower on a loan.  So let’s say there’s a newly graduated Pharmaceutical Salesperson applying for a FHA Loan.  If they just started their job, they likely don’t have the history of 2 years to show commissions earned.  We can add a parent, or other family member to the loan to help in qualifying! We can not add family for FHA Construction Loan.

If you have more questions about qualifying for a FHA Construction Loan in NC, please call Steve and Eleanor Thorne 919 649 5058.  We love helping people make their dreams come true!