While buying a pre-built home has been the growing trend in Texas for the last few decades, there are still many people who prefer to construct their own home. However, a lot of them don’t have the economic luxury of building their own homes in today’s economy without loan support. This is where the different types of construction loans in Texas come in that are available in the form of various sources like money lenders and brokers. One of the best home construction loan programs in Texas within everyone’s reach is the FHA Construction to Permanent Mortgage program, providing a long-term financial back-up to you that is easy to pay off.
What is an FHA Construction Loan?
The first thing the reader needs to understand is that the FHA itself doesn’t provide any loans; it provides insurance to mortgage lenders that will qualify you for particular amounts against your inclusion in loan programs atypical to FHA, ensuring that the applicant has passed the FHA screening which is very flexible and lenient.
The FHA Construction to Permanent Mortgage loan program is divided into two phases: long-term and short-term. The short-term loan is given during the construction phase. Upon the completion of the construction, the home loan translates into a long-term mortgage that can be paid off comfortably which typically carries a term of 30-years.
The advantage lies in the fact that the short-term loan is fluid, the homebuyer only pays interest on the loan during the construction phase. The funds are paid to the builder in increments or several chunks allotted for different stages of the construction. However, the kicker is the tenure of the interest rate, which unlike other types of loans, isn’t stretched over time; the interest period extends to only what’s accrued during the short-term phase of the loan, taking substantial financial pressure off your back.
After completion of the construction, the homeowner signs a certificate of occupancy, certifying that the house construction is now complete. The loan is converted to permanent financing, just like a regular FHA loan.
The FHA Construction to Permanent Mortgage loan program has two significant qualifying conditions: that you have purchased the land where your home will be constructed before construction or within six months of the application and that your builder is a licensed contractor. The other qualifying conditions can be easily met as a high credit score, and the debt-to-income ratio is not that much of an issue in FHA’s loan qualifying process. With all these advantages, the Construction to Permanent Mortgage loan program might be the best option for first-time homeowners going for construction loans in Texas.
If you are considering building your own home and want to know more about the FHA construction loan application process, contact your nearest FHA-approved lender. They are ready to answer your questions.