Monday, May 12, 2008

FHA Tip: Properties Under construction or Existing Construction Less Than One Year Old

Properties Under Construction or Existing Construction Less than One Year Old Maximum Financing May Not be Allowed unless...

Properties not meeting the criteria shown below are considered as under construction or existing construction-less than one year old and are limited to 90 percent financing, i.e., 90 percent of the lesser of the appraiser’s estimate of value or sales price, plus or minus the adjustments required by paragraph 1-7, A-C. For a property to be eligible for greater than 90 percent financing, whether or not it has been previously occupied, it must meet one of the criteria described below. Otherwise, the property is classified as "under construction" or "less than one year old" and is limited to 90 percent financing.

1. Construction was completed more than one year preceding the borrower's signature on the Addendum to Uniform Residential Loan Application (form HUD-92900-A, page 2); or

2. The dwelling's site plans and materials were approved by the Department of Veterans Affairs (VA), an eligible DE underwriter, or a builder under FHA's builder certification procedures, (see HUD Handbook 4145.1 REV-2) before construction began; or

3. The local jurisdiction has issued both a building permit (prior to construction) and a Certificate of Occupancy or equivalent. (NOTE: This paragraph does not apply to condominiums or manufactured housing because of the special circumstances regarding their approval.); or

4. The dwelling is covered by a builder's ten-year insured warranty plan that is acceptable to HUD; or

5. The dwelling will be moved to a new location and the property is eligible for an insured mortgage at the new location by one of the methods described in 2 above.

Shirley Nault has been a mortgage professional for over 20 years. Visit her other mortgage web sites go to or