Build exactly what you want—with FHA financing

FHA construction loans (also called FHA construction-to-permanent loans) are for building a new home from the ground up on vacant land. The loan covers land purchase and construction costs in one loan.

FHA 203(k) rehab loans are for buying an existing home that needs renovations, or refinancing your current home to fund major repairs. You cannot use a 203(k) to build new construction – it's only for renovation of existing structures. If you're building from scratch in Nevada, you need an FHA construction loan, not a 203(k).

No. FHA construction loans require a licensed, FHA-approved general contractor. You cannot be the general contractor or do owner-builder projects with FHA financing. This is a strict FHA requirement to ensure the home is built safely and to code.

However, you can hire subcontractors yourself if your general contractor allows "sweat equity" arrangements – meaning you do some of the work (like painting, landscaping) to reduce labor costs, as long as the licensed GC oversees everything. But the GC must be in charge of the project and all structural work.

During the construction period (6-12 months), you make interest-only payments on the amount of funds that have been disbursed to the builder – not the full loan amount. This keeps your monthly cost low during construction.

Example: If your total loan is $400,000 at 7% interest, but only $100,000 has been drawn so far:

Monthly interest-only payment = $100,000 × 7% ÷ 12 months = ~$583/month

As more funds are drawn, your interest-only payment increases proportionally. Most Nevada borrowers pay $500-$1,500/month in interest during construction.

You also continue paying for your current housing (rent or mortgage) during construction, so budget for both. Once construction completes, the loan converts to a regular mortgage with principal + interest payments.

Yes, if you don't already own the land. The FHA construction loan can cover:

• Land purchase price
• All construction costs (materials, labor, permits)
• Construction interest during build
• Closing costs

If you already own the land: The land's current appraised value can count toward your down payment or equity. For example, if your land is worth $50,000 and you're building a $350,000 home (total $400,000), and the land is owned free-and-clear, that $50,000 equity could satisfy your 3.5% down payment requirement ($14,000).

However, if you recently purchased the land (within 6-12 months), FHA may use your purchase price instead of current appraised value. Work with your loan officer to structure this optimally.

Over Budget: The FHA loan amount is locked at closing based on your contract price. If construction costs exceed the contract price due to changes or overruns, you are responsible for the overage out-of-pocket. That's why a fixed-price contract with a reputable builder is crucial. Build a 10% contingency into your budget for unexpected costs.

Timeline Extension: If construction takes longer than the agreed timeline (usually 6-12 months), you can request an extension from the lender. Most lenders allow one extension. You'll continue making interest-only payments during the extended period. Communicate any delays immediately to your lender.

Builder Default: If the builder abandons the project or goes bankrupt, the situation becomes complex. You may need to hire a new contractor to complete the work, which can be expensive. FHA-approved builders are vetted to minimize this risk, and many carry completion bonds for protection.

Yes, FHA construction loans are available statewide in Nevada – including Clark County (Las Vegas, Henderson, Boulder City), Washoe County (Reno, Sparks), and rural areas. However, availability depends on finding:

• FHA-approved builders in your area (more common in Las Vegas/Reno, but available statewide)
• Buildable land (zoned residential, utilities accessible)
• FHA-approved appraisers who can handle construction appraisals (available statewide)

Rural Nevada areas may have fewer FHA-approved builders, and construction costs may be higher due to distance. We can help you locate approved builders and assess feasibility in your desired location. Contact us to discuss your specific area.

Your FHA construction loan amount is based on the lower of:

1. Total construction cost (land + construction + closing costs + construction interest reserves)
2. "Subject-to-completion" appraised value (what the home will be worth when built)
3. FHA loan limits for Nevada ($498,257 for single-family in most counties)

Example: You're building in Las Vegas:

• Land cost: $80,000
• Construction cost: $350,000
• Closing costs + reserves: $20,000
• Total: $450,000

FHA appraiser estimates completed value: $475,000. The loan would be based on $450,000 (the lower amount). You'd need 3.5% down = $15,750, and the loan would cover the remaining $434,250.

If the appraised value came in at $430,000, the loan would be limited to $430,000 (you'd need to reduce costs or add more down payment).