FHA
construction loans

Overview

This guide covers government-backed construction financing — including how these programs work, what lenders look for, and how to get started. Qualification requirements vary by lender and program type. All loan programs are subject to credit approval and lender-specific criteria.

• Program availability varies by lender
• Qualification requirements vary by scenario
• Multiple program types available
• Speak with a licensed MLO for your situation

Getting Started

JumboLoan.com works with wholesale and portfolio lenders to provide access to programs not available at retail banks. Start our AI-assisted application or call us to discuss your scenario — a licensed MLO will identify the programs best suited to your situation.

• Start at AIMortgageApplication.com
• Licensed MLO reviews your scenario
• Multiple programs compared simultaneously
• NMLS# 1967971 — verify at NMLSConsumerAccess.org

FHA financing for new construction — the real product

The FHA construction loan that matters in practice is the FHA one-time-close (OTC) construction-to-permanent loan: a single closing funds the lot and build, and the loan converts to a standard FHA mortgage at completion — bringing FHA's signature advantage, a 3.5% minimum down payment, to custom construction. No other construction product approaches that leverage: conventional construction loans want 10–20% of project cost. For credit-flexible, cash-light borrowers who want to build rather than buy, FHA OTC is frequently the only realistic path.

FHA also insures the 203(k) renovation program — construction lending's cousin for buying and rehabilitating existing homes — but for ground-up builds, OTC is the vehicle.

How FHA OTC differs from conventional construction lending

• Down payment: 3.5% of total acquisition cost (land + construction) with 580+ credit under FHA rules — lender overlays commonly want 620–660+ for construction.
• Loan ceiling: capped at the county FHA limit — $524,225 for one unit in most 2026 counties (higher in high-cost areas), which sizes the buildable project; luxury builds exceed it quickly.
• Mortgage insurance: upfront MIP (1.75%) plus annual MIP, generally for the life of the loan at minimum down — the structural cost of the leverage.
• Builder requirements: the builder must be licensed, insured, and willing to work within FHA OTC documentation — not all are; ask early.
• Property standards: the completed home must meet FHA minimum property requirements — rarely an issue for new construction built to code.
• No payments during the build on most OTC structures — interest is handled inside the loan until conversion.

Fewer lenders offer FHA OTC than plain FHA loans; it is a placement product.

Is FHA OTC your right structure?

The decision usually resolves on three questions. Does the total project fit under your county's FHA limit? (If not, conventional or jumbo construction is the path.) Is minimum cash-to-build the priority? (If you have 10–15% available, conventional construction avoids life-of-loan MIP and deserves a side-by-side.) Are you a veteran? (VA's OTC at $0 down beats FHA's 3.5% outright for eligible borrowers.) We quote FHA OTC against its conventional and VA alternatives on one page, with the MIP stream priced honestly across your expected hold — the comparison that turns a program choice into arithmetic. Licensed broker, NMLS# 1967971.

Quick answers

Can FHA OTC finance a manufactured home build?

Yes — manufactured and modular homes on permanent foundations are expressly eligible, and FHA OTC is among the most-used financing routes for them.

Does the 3.5% down apply to land I'm buying too?

The 3.5% computes on total acquisition cost including the lot — and if you already own the land, its equity offsets the requirement, sometimes entirely.

Can I roll closing costs into an FHA OTC?

Within loan-limit and LTV constraints, several costs finance — including the upfront MIP. Your cash-to-close on FHA OTC is routinely the lowest in construction lending.