FHA Construction for a house hack?

Question

I have a few questions that I figured would be answered relatively quickly here.

I understand the basics of an FHA loan, 3.5% down, must live in one of the units, must live there for at least a year, etc.

My question is, if I can’t find a fourplex for a decent price, would it be viable, or even permitted to construct a building under those terms?

Thank you

Richard M

Bill Plymouth · Answer

@Richard S Myers have you considered and FHA 203k?  It’s essentially a rehab loan.  It wraps the rehab costs in with the purchase price.  You just can’t do any of the work yourself.  You would need to use a HUD approved contractor.

It’s  a good way to buy below market, Build in some equity, and it’s way easier than constructing a new building.

Greg Dickerson · Answer

Construction loans require 20-25% down and FHA requires a lot of detailed paperwork from the builder so you will need one who is familiar with the process.

Best thing to do is discuss with your lender and go from there.

Maxwell Fontaine · Answer

203K loans are great if its your first property. The good far out ways the potential negatives. There are 2 203 loans which is the 203B which is mostly cosmetic renovations not allowed to move any walls is really how they define it. Then the 203K which is much more in depth and larger rehabs like additions or rebuilding parts of the property. The contractor does in fact need to be approved but its based on the cost of the rehab. Its a very good product to use if you want to get your foot in the door. Remember you don't need to hit a home run on your first deal. If you eliminate your cost of living (rental expense) you are still essentially making that money every month anyway.

Richard S Myers · Answer

@Bill Plymouth

My main concern is finding a reasonable existing fourplex. Whereas, there is quite a lot of land near me that could likely be built on.  I’m just mulling over some ideas as of right now.

Christopher Phillips · Answer

@Richard S Myers

Not impossible. You would need to line up the lender willing to do it. Builders work off of deposits and you would need to line up a lender that will work with construction to permanent FHA loans.

FHA Construction for a house hack?

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