source:
  type: guide
  id: hud-4000-1-ii-k-building-on-own-land
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — k. Building
    on Own Land (06/17/2019)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — k. Building
    on Own Land (06/17/2019).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-k-building-on-own-land-full
  canonical_id: hud-4000-1-ii-k-building-on-own-land-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — k. Building
    on Own Land (06/17/2019)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — k. Building
      on Own Land (06/17/2019)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'k. Building on Own Land (06/17/2019) i. Definition Building
      on Own Land refers to the permanent financing of a newly constructed dwelling
      on land owned by the Borrower and may include the extinguishing of any construction
      loans. ii. Eligibility The Borrower must have contracted with a builder to construct
      the dwelling. The builder must be a licensed general contractor. The Borrower
      may act as the general contractor, only if the Borrower is also a licensed general
      contractor. iii. Calculating Maximum Mortgage Amount The Mortgagee must use
      the lesser of the appraised value or the documented Acquisition Cost to determine
      the Adjusted Value. The maximum mortgage amount is calculated using the appropriate
      purchase Loan-to- Value (LTV) percentage of the lesser of the appraised value
      or the documented Acquisition Cost. The documented Acquisition Cost of the Property
      includes: • the builder’s price or the sum of all subcontractor bids and materials;
      • Borrower-paid options and construction costs not included in the builder’s
      price to build; • interest and other costs associated with a construction loan
      obtained by the Borrower to fund construction, if applicable; and • either of
      the following: o the lesser of the cost of the land, or appraised value of the
      land, if the land is owned six months or less at case number assignment; or
      o the appraised value of the land if the land has been owned for greater than
      six months at case number assignment or was received as an acceptable Gift.
      For Manufactured Housing, the builder’s price to build includes the sum of the
      cost of the unit(s), the cost to transport the unit from the dealer’s lot to
      the installation site, and all on-site installation costs. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      8. Programs and Products - Building on Own Land (06/17/2019) Handbook 4000.1
      483 Last Revised: 11/26/2025 iv. Minimum Required Investment (A) Standard The
      Borrower may utilize any cash investment in the Acquisition Cost of the Property
      or land equity to satisfy the MRI in accordance with Calculating Maximum Mortgage
      Amount. (B) Required Documentation The Mortgagee must document that the cash
      investment was from an acceptable source of funds in accordance with TOTAL or
      manual underwriting requirements as applicable. If the land was given as a Gift
      to the Borrower, the Mortgagee must verify that the donor was not a prohibited
      source. The Mortgagee must obtain standard gift documentation with TOTAL or
      manual underwriting requirements for any Gift of land. v. Borrower’s Additional
      Equity in the Property The Borrower may not receive cash back from the additional
      equity in the Property, but the Borrower may replenish their own cash expenditures
      for any Borrower-paid extras over and above the contract specifications and
      any out-of-pocket expenses not included in the builder’s price. The Mortgagee
      must obtain an itemization of the extras and expenses and the cost of each item.
      vi. Required Documentation The Mortgagee must document the date of purchase
      of the land by obtaining the Closing Disclosure or similar legal document. The
      Mortgagee must obtain evidence that the funds used to pay Borrower-paid options
      were derived from an acceptable source. The Mortgagee must obtain an itemization
      of the options, expenses, and cost of each item. The Mortgagee must comply with
      New Construction requirements. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages'
  judgment: false
