How does the FHA Construction to Permanent Mortgage program work?

A Construction to Permanent mortgage combines the features of a construction loan (a short-term interim loan for financing the cost of construction) and the traditional long-term permanent residential mortgage with a single mortgage closing prior to the start of construction.

The borrower must have contracted with a builder (must be a licensed general contractor) to construct the improvements.  The Borrower may act as the general contractor, only if the Borrower is also a licensed general contractor.

The borrower must be purchasing the land at the closing of the construction loan, or have owned the land for six months or less at the date of case number assignment.

At closing, after funds are disbursed to cover the purchase of the land, the balance of the mortgage proceeds must be placed in an escrow account to be disbursed as construction progresses.

Amortization of the permanent mortgage must begin no later than the first of the month following 60 Days from the date of the final inspection or issuance of the CO.

For additional information see Handbook 4000.1 II.A.8.j available at