• Preston Morris

FHA Construction Loans | Requirements and Process 2022

Updated: Aug 31

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.

What are the new FHA guidelines for 2022?

The national conforming loan limit for 2022 is $647,200. FHA's 2022 minimum national loan limit “floor”, of $420,680 is set at 65 percent of the national conforming loan limit. This “floor” applies to those areas where 115 percent of the median home price is less than the “floor” limit.


Looking For a FHA Construction Loan?


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What would disqualify a home from FHA?

Homes Must Be Primarily Residential It is possible to purchase a mixed-use property using an FHA home loan and its low down payment requirements, but if the home is not primarily used as a residence and has 50% or more floor space taken up by non-residential use it cannot qualify for an FHA mortgage.


Will FHA limits go up in 2022?

The Federal Housing Administration (FHA) just announced relief for those hoping to buy a home this year. As of January 1, 2022, the loan limits for FHA-backed loans will rise 18%—a record increase—to reflect the market and allow qualified buyers to continue to access affordable home financing.


Defining 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. Digging of footing is not considered permanent.

  • Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.

  • Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.”

What is the Process for Building with an FHA Loan? For buying an existing new construction home with a traditional FHA loan, the process is simple, straight-forward, and comparatively quick.

  1. Get pre-qualified for a home loan. This is when we check your finances and confirm that you are eligible for an FHA loan.

  2. Explore new construction homes with builders in your local area.

  3. Once you have an accepted offer on your newly-built home, notify us so that we can begin the process of securing your home loan.



For an FHA construction-to-permanent loan the process can vary, depending on the lender and the borrower’s exact circumstances, you generally follow these steps when building with an FHA loan:

  1. Find qualified vacant land. This can be land you already own or land you need to purchase.

  2. Get pre-qualified for the loan. This is when the lender will check your finances and confirm that you are eligible for the FHA construction-to-permanent loan.

  3. Choose a qualified builder.

  4. Get an FHA appraisal for the proposed building plans. This will confirm that the structure will comply with FHA property requirements.

  5. Close on the construction portion of the loan. The construction will then be funded by the loan as work is completed. Any unused funding will go toward your loan principal (so you won’t be able to use left-over cash for other things).

  6. Complete the build.

  7. Convert the loan to a long-term FHA mortgage.

Looking For a FHA Construction Loan?


CLICK Here For Instant FHA Construction Loan Application!

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