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FHA/HUD Update New Construction Inspection Rules


FHA/HUD Update New Construction Inspection Rules
In 2020, the FHA and HUD announced pending changes to the FHA Single-Family Home Loan Lender’s Handbook, HUD 4000.1. This was due to policy alterations in 2018 and 2019 which required the FHA and HUD to overhaul portions of HUD 4000.1 to accommodate the modified rules. Those changes were made and announced as being effective in 2021.

On February 4, 2021, the following regulatory changes became effective for all applicable FHA construction loans with case numbers assigned on or after that date.
 
The changes include additions and clarifications of portions of HUD 4000.1 relevant to new construction loans. For example, HUD 4000.1 now includes the following list of property types that can be guaranteed with an FHA construction Loan mortgage:
 
  • Site Built Housing (single unit)
  • Site Built Housing (multiple units)
  • Condominium units in Approved Projects or Legal Phases
The section of HUD 4000.1 titled, Required Inspections for New Construction Financing adds the following information to the rules:

For all Site Built Housing and Condominium units (by construction status at time of appraisal) The participating FHA lender is required to obtain certain requirements:
 
  • Proposed Construction--copies of the building permit (or equivalent) and Certificate of Occupancy (CO); or three inspections (footing, framing and final) performed by the local authority with jurisdiction over the Property or an ICC certified Residential Combination Inspector (RCI) or Combination Inspector (CI) (for Modular Housing, footing and final only). The new rules state that in the absence of such ICC certified RCI or CI, the Mortgagee may obtain three inspections (footing, framing, by a registered architect or a structural engineer.
  • Under Construction--copies of the building permit (or equivalent) and CO (or equivalent); or  a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or  in the absence of such ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third-party, who is a registered architect or a structural engineer.
  • Existing Less than One Year--a copy of the CO (or equivalent); or a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or  in the absence of such ICC certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third-party, who is a registered architect or a structural engineer.
These rules are not for the borrower, it’s true, but borrowers who understand this process including the needs for regulations such as the ones listed above will have a better idea about the complexity of a construction loan and why it pays to give yourself extra time to get the loan applied for and executed properly. If you are in a hurry to move into your new home, consider an FHA purchase loan for existing construction; if you have the ability to wait and be patient with the construction loan process the One-Time Close construction loan can help you get into the home of your dreams. FHA Construction loans may seem more complicated than other types of mortgage lending, but the results are worth it.

Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.

OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.

Your email to [email protected] authorizes OneTimeClose.com to share your personal information with a mortgage lender licensed in your area to contact you.

1.  Send your first and last name, e-mail address, and contact telephone number.

2.  Tell us the city and state of the proposed property.

3.  Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.

4.  Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your  debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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Articles, Updates, and Guidelines
OTC articles
One-Time Close Mortgages: Fact and Fiction

There are several different types of One-Time Close loans, also known as single-close construction loans. You can apply for an FHA One-Time Close construction loan, there is a VA equivalent, and even a USDA construction loan. Construction loans are available for any financially qualified borrower.

FHA/HUD Update New Construction Inspection Rules

In 2020, the FHA and HUD announced pending changes to the FHA Single-Family Home Loan Lender’s Handbook, HUD 4000.1. This was due to policy alterations in 2018 and 2019 which required the FHA and HUD to overhaul portions of HUD 4000.1 to accommodate the modified rules.

Home Loan Options In 2021: Construction Loans and More

If you are giving serious thought to becoming a homeowner in 2021 you have picked a very good time to explore your options. FHA loan limits are higher in 2021 than they were in most areas during 2020, and there are options including the FHA One-Time Close construction mortgage.


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