FHA Construction 3.5% Down Including Land
How Does it Work?
First, the applicant will need to find a plot of land and work out the costs of building a home on it. In some cases, the applicant will have to do this on their own, but in others, they may have help. For example, an applicant may use an FHA OTC loan to purchase an un-built house in a housing development.
Once the land and building costs are calculated and the loan is received, the buyer will need to pay 3.5% of the loan as a down payment. This amount is figured based on the total cost (i.e., land cost and building costs combined). The closing costs can also be included in the loan, as can the interest payments that would need to be made during the construction of the house.
If the applicant already owns the land that they are building on, the equity they have built up will act like a credit towards the down payment. In many cases, this means that the applicant will not have to make any down payment at all.
FHA OTC Requirements
In order to qualify for an FHA OTC loan, the applicant will have to meet the following requirements:
- Have a credit score of at least 640
- Have a debt-to-income ratio of no more than 45%
- Have not declared bankruptcy in the past two years
- Have not had a foreclosure in the past three years
- Have not had any credit collections of more than $5,000 in the past two years
- Have no open tax liens or judgments