Preston Morris
- Jun 7, 2022
- 2 min read

FHA construction loan requirements 2022

Updated: Aug 3, 2022

FHA construction loans provide an option for someone looking to build or update a home—but who doesn’t necessarily meet the requirements of a conventional mortgage. Thanks to the more flexible lending requirements, borrowers with low to moderate incomes or below-average credit still have a chance at homeownership.

What is FHA new construction?

FHA loan rules in HUD 4000.1 define “new construction”. “New Construction refers to Proposed Construction, Properties Under Construction, and Properties Existing Less than One Year as defined below: Proposed Construction refers to a Property where no concrete or permanent material has been placed.

Looking For a FHA Construction Loan?

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Can you build a house using an FHA loan?

Yes, you can build a house with an FHA loan! You have two basic options for financing a new build with an FHA loan: 1. Purchase an existing newly built home from the builder with a traditional FHA loan.

FHA Construction Requirements

If you're considering using an FHA loan for new construction, it’s important to know what to expect.

Any FHA new construction loan will require the builder to provide a set of documents including a certification for plans and specs, wood destroying insect report, and a warranty of completion of construction. Homes with a well or septic tank will require additional health and safety reports.

Beyond that, the exact FHA construction loan requirements will depend on a few factors, including the type of property and the stage of the project.

The FHA defines 3 stages of a new construction project:

Proposed Construction: No permanent structural elements have been placed, including pouring the foundation.
Under Construction: A property that has some permanent elements but hasn't been issued a certificate of occupancy.
Existing Less Than 1 Year: A property that has had a certificate of occupancy for up to 1 year but has never been occupied.

The Bottom Line: Construction Loans Can Make Your Dream A Reality

If it doesn’t look like your ideal home is available while you peruse the listings in your preferred market, the dream doesn’t have to end. Envisioning the perfect mix of location, style and usability in a home is one of the most fun parts of the home buying process and it doesn’t have to be just a vision. You can design, build and furnish the exact home you want with a variety of financial support paths to help get you there. Whether it’s a construction loan, a renovation loan, a HELOC or any other number of options, finding the right way to borrow money for your next home doesn’t have to be too hard. Research all the options, figure out the best type of loan for your specific needs and shop around for the best price.