FHA Construction Loan — Build with 3.5% Down
An FHA construction-to-permanent loan funds a new custom build anywhere in the U.S. — same low 3.5% down and flexible credit as an FHA purchase loan. The loan funds the build, then converts to a 30-year FHA mortgage at completion.
Check eligibility for FHA construction
FHA Construction-to-Permanent Loan at a Glance
Down payment
3.5% (580+ credit)
Construction period
Up to 12 months
Closing structure
Single-close — one set of closing costs
Mortgage insurance
1.75% upfront MIP + annual MIP
Property type
New single-family primary residence
Location
Anywhere in the U.S. — no rural restriction
Connect with an FHA Construction Lender
How the FHA Construction-to-Permanent Loan Works
It's a single loan with two phases: a construction period funded by draws, and a permanent mortgage that kicks in automatically when the home is done.
Application & lender approval
You apply for an FHA construction-to-permanent loan with an FHA-approved lender. The lender reviews your income, credit, and down payment — same borrower criteria as an FHA purchase loan — plus your builder and construction plans.
FHA endorsement & construction start
Once the lender underwrites and FHA endorses the case, construction can begin. The lender manages draw requests — funds are released in stages as construction milestones are verified.
Construction period
During construction you typically pay interest only on draws taken. The construction period is usually up to 12 months. Your lender inspects the property at each draw stage before releasing the next disbursement.
Permanent loan conversion
When construction is complete and the final inspection passes, the loan converts to a standard FHA permanent mortgage — the same 30-year fixed structure as a purchase loan. You begin making full principal and interest payments, including MIP.
“Construction to Permanent (CP) refers to the construction of a dwelling on land owned or being purchased by the Borrower. The CP program combines the features of a construction loan with that of a traditional long-term permanent residential Mortgage using a single mortgage closing prior to the start of construction.”
FHA Construction-to-Permanent Loan Requirements
If you already know FHA purchase loans, borrower rules will look familiar. The builder requirement is what's unique to construction — and what lenders scrutinize most.
1. Builder requirements
Your builder must meet FHA and lender requirements — licensed general contractor, insured, and willing to work with FHA construction financing. What lenders care about most is that your contractor has completed a similar project before.
- Licensed general contractor in the state where the home is being built
- Must provide a fixed-price construction contract
- Cannot be the borrower — owner-build is not permitted (unless you are a licensed GC)
- Lender reviews track record, insurance, and qualifications before approving
2. Borrower eligibility
- Credit score 580+ for 3.5% down; 500–579 typically requires 10% down
- Primary residence — not an investment property or vacation home
- Steady income and employment history that meet FHA underwriting
- Debt-to-income typically within FHA guidelines (lender overlays may be tighter on construction)
- Able to cover the minimum required investment (down payment) from acceptable sources
3. Property requirements
- No location restriction — available anywhere in the U.S.
- New construction only — not a renovation of an existing home (that's a 203(k))
- Must be a primary residence when complete
- Home must meet FHA property standards at final inspection
- Total loan (land + build) within FHA loan limits for the county
More FHA & Construction Resources
FHA loan rates
Compare FHA rates, MIP, and how FHA stacks up for first-time buyers.
FHA prequalify
Check whether you meet FHA credit and down payment guidelines before you build.
USDA construction
Eligible rural/suburban areas can build with $0 down — often cheaper than FHA long-term.
All construction loans
Compare USDA, FHA, VA, and conventional construction-to-permanent options side by side.
Build Anywhere with 3.5% Down — If You Qualify
FHA construction loans are available but not widely offered — working with a lender who regularly does them is the difference between a smooth process and a difficult one. The form above connects you with FHA-experienced lenders who can confirm your eligibility and builder qualifications.
Connect with an FHA construction lender
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