An FHA construction loan is a government-backed one-time close loan that lets you build with as little as 3.5% down and a 580 credit score. In 2026 FHA loan limits start at $541,287 and reach $1,249,125 in high-cost counties. You pay an upfront mortgage insurance premium of 1.75% plus annual premiums, typically about 0.55% for most borrowers.
FHA construction loan requirements
| Requirement | FHA construction-to-permanent |
|---|---|
| Down payment | 3.5% with a 580+ credit score; 10% with 500–579 |
| Credit score | 580 for 3.5% down; many lenders set 620–640 |
| Debt-to-income | typically up to 43% |
| Upfront mortgage insurance | 1.75% of the loan |
| Annual mortgage insurance | about 0.55% for most borrowers, paid monthly |
| 2026 loan limit | $541,287 in most counties, up to $1,249,125 in high-cost areas |
| Occupancy | primary residence; 1–4 units if you live in one |
| Builder | licensed, insured and approved by the lender; owner-builders generally not allowed |
How does an FHA construction loan work?
- Get preapproved with a lender that offers FHA one-time close loans.
- Choose land that meets FHA guidelines and a lender-approved builder.
- Close once; funds go into escrow and are paid out as construction milestones are inspected.
- Pay interest only during construction. The usual construction phase is 12 months, with a possible six-month extension.
- Principal and interest payments begin after the certificate of occupancy or final inspection.
Is an FHA construction loan right for you?
It suits buyers with a small down payment or a credit score below what conventional construction lenders want. The trade-off is mortgage insurance, the loan limit for your county, and fewer lenders to choose from. Keep a contingency of 5% to 10% of the build cost, because the loan amount will not increase during construction.
Frequently asked questions
Can I use an FHA construction loan to buy land?
Yes, the land can usually be included in the one-time close loan.
Can I be my own builder with an FHA loan?
Generally no. FHA construction loans require a licensed, lender-approved builder.
More on construction loans
- How construction loans work
- Construction loan rates
- Construction-to-permanent loans
- FHA construction loans
- VA construction loans
- USDA construction loans
- How to get a construction loan
- Construction loan calculator
Sources
- FHALoans.com: FHA construction-to-permanent loan (updated July 2026)
- The Lenders Network: Construction loan requirements (updated June 2026)
Loan terms change often and vary by lender. Nothing on this page is a loan offer or financial advice: confirm current rates, fees and eligibility with lenders before you apply.