The FHA 203(b) Loan Program - STM Partners

New Construction, Continued
Building on
Own Land,
(continued)
• Borrowers who are building homes on land they already own are still required to
have a three and one half percent (3.50%) down payment (or its equivalent in
land equity) into the transaction. All mortgage transactions must be calculated
using the documented acquisition cost.
Note: A manual verification of the calculation is necessary to determine that the
maximum loan amount is accurate. Do not rely on computer-generated
calculations during the processing and underwriting of the loan as an accurate
loan amount.
• The documented acquisition cost is entered in the Sales Price line, of the FHA
Loan Underwriting and Transmittal Summary (HUD-92900-LT) and includes the
sum total of the following items:
• builder’s price or sum of all subcontractors’ bids, materials, etc.,
• cost of the land (if owned more than six [6] months or received as an
acceptable gift, the appraised value of the land may be used instead of its
cost), and
• interest and other costs associated with any construction loan obtained by
the borrower to fund construction of the property.
• The calculated Loan-to-Value Ratio shown will reflect the lesser of the sales
price or the appraiser’s value estimate, as it does on other purchase
transactions, and is the same value used for TOTAL Scorecard.
• If the borrower receives cash at closing to replenish his/her own cash funds
spent during construction, it is not cash-out if documentation (i.e., canceled
checks and paid receipts) is provided that the funds were paid out of pocket.
• If the borrower receives cash-back of more than $250 at closing, the maximum
LTV is limited to 85.00%.
Continued on next page
Section 2.22 July 27, 2012
FHA 203(b) Loan Program Page 38 of 217
Correspondent Seller Guide