For a construction to permanent loan for approximately $200k, what credit scores are needed for co-applicants? Also, the builder we have chosen is willing to allow us to do some of the work outselves to lower the costs to build what we need to accomodate 3 additions to our family. If us doing some of the work ourselves give us more than 20% equity, will we have to carry PMI? We have pre-qualified for an FHA loan for $250K.
Answer #1
Good Morning and thank you for submitting your question about Construction/Permanent financing.
Generally speaking, most construction programs start at an 80% Loan to Value eliminating the need for mortgage insurance. This 20% equity can be made up in cash down payment, equity in existing land or home to be renovated, but cannot be in the form of sweat equity. While doing some of the work on your own might reduce your overall construction cost, it will not reduce the 20% equity requirement.
Credit scores for either borrower must be 680 or better to be considered for this type of financing. On top of these items, there is a builder review process that needs to be done to make sure your chosen builder is properly licensed, bonded, and insured and in secure financial shape to start and complete your project.