source:
  type: regulation
  id: hud-4000-1-programs-and-products-construction-to-permanent
  authority: HUD Handbook 4000.1 — Programs and Products - Construction to Permanent (09/20/2021)
  description: "HUD Handbook 4000.1 section \"Programs and Products - Construction to Permanent\". Gap-fill\
    \ (verbatim, title-diff). \n"
obligations:
- id: hud-4000-1-programs-and-products-construction-to-permanent-full
  canonical_id: hud-4000-1-programs-and-products-construction-to-permanent-full
  section: HUD Handbook 4000.1
  description: "Programs and Products - Construction to Permanent: j. Construction to Permanent (09/20/2021)\
    \ \nConstruction to Permanent (CP) refers to the construction of a dwelling on land owned or \nbeing\
    \ purchased by the Borrower. The CP program combines the features of a \nconstruction loan with that\
    \ of a traditional long-term permanent residential Mortgage \nusin…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - hud
  - 4000-1
  - curated
  primary_source:
    tier: 1
    authority: HUD Handbook 4000.1 — Programs and Products - Construction to Permanent (09/20/2021)
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: "j. Construction to Permanent (09/20/2021) \nConstruction to Permanent (CP) refers\
      \ to the construction of a dwelling on land owned or \nbeing purchased by the Borrower. The CP program\
      \ combines the features of a \nconstruction loan with that of a traditional long-term permanent\
      \ residential Mortgage \nusing a single mortgage closing prior to the start of construction. \n\
      A construction loan refers to a short-term interim loan for financing the cost of \nii. General\
      \ Eligibility \nThe Borrower must have contracted with a builder to construct the dwelling. The\
      \ builder \nmust be a licensed general contractor. \nThe Borrower may act as the general contractor,\
      \ only if the Borrower is also a licensed \ngeneral contractor. \niii. Property Eligibility \nThe\
      \ Borrower must either be purchasing the land at the closing of the construction loan, \nor already\
      \ own the land. \niv. Calculating Maximum Mortgage Amount \nThe Mortgagee must use the lesser of\
      \ the appraised value or the documented Acquisition \nCost to determine the Adjusted Value. \nThe\
      \ maximum mortgage amount is calculated using the appropriate purchase Loan-toValue (LTV) percentage\
      \ of the lesser of the appraised value or the documented \nAcquisition Cost. \nThe documented Acquisition\
      \ Cost of the Property includes: \n• the builder’s price (includes cost of land if being purchased\
      \ from builder), or the \nsum of all subcontractor bids and materials (if land is already owned\
      \ by the \nBorrower); \n• Borrower-paid options and construction costs not included in the builder’s\
      \ price \nto build; \n• closing costs associated with any interim financing of the land, and \n\
      o for land that is not yet purchased or has been owned six months or less at case \nnumber assignment,\
      \ the lesser of the cost of the land or appraised value of the \nland; or \n\n \no for land that\
      \ has been owned for more than six months at case number \nassignment or was received as an acceptable\
      \ Gift, the appraised value of the \nland. \nFor Manufactured Housing, the builder’s price to build\
      \ includes the sum of the cost of the \nunit(s), the cost to transport the unit from the dealer’s\
      \ lot to the installation site, and all \non-site installation costs. \nv. Minimum Required Investment\
      \ \nThe Borrower may utilize any cash investment in the Acquisition Cost of the Property \nor land\
      \ equity to satisfy the Minimum Required Investment (MRI) in accordance with \nCalculating Maximum\
      \ Mortgage Amount. \nThe Mortgagee must document the cash investment was from an acceptable source\
      \ of \nfunds in accordance with TOTAL or manual underwriting requirements as applicable. \nvi. Required\
      \ Documentation \nThe Mortgagee must obtain the Closing Disclosure or similar legal document showing\
      \ \nthe cost of the land and the date of purchase. \nThe Mortgagee must obtain evidence that the\
      \ funds used to pay Borrower-paid options \nwere derived from an acceptable source. The Mortgagee\
      \ must obtain an itemization of the \noptions and expenses, and cost of each item. \nIf the land\
      \ was given as a Gift to the Borrower, the Mortgagee must verify that the donor \nwas not a prohibited\
      \ source. \nThe Mortgagee must comply with New Construction requirements. \nvii. Mortgage Interest\
      \ Rate \nDuring the construction period, the interest rate may be variable. The Mortgagee and the\
      \ \nBorrower must enter into an agreement that: \n• documents the range in which the interest rate\
      \ may float during construction; \n• documents the point of interest rate lock-in; \n• specifies\
      \ that the permanent Mortgage will not exceed a specific maximum \ninterest rate; and \n• permits\
      \ the Borrower to lock in at a lower rate, if available and they have not \nalready locked in a\
      \ rate. \n\n \nThe Mortgagee must qualify the Borrower for the Mortgage at the maximum rate at \n\
      which the permanent Mortgage may be set. \nRequired Documentation for Closing \nIn addition to standard\
      \ FHA documents, the following documents must be used: \n(A) A Construction Rider to the Note, and\
      \ Construction Loan Agreement. \nThese construction documents may be in any form acceptable to the\
      \ Mortgagee, \nbut they must provide that all special construction terms end when the \nconstruction\
      \ loan converts to a permanent Mortgage. After conversion, only the \npermanent mortgage terms (based\
      \ on standard documents) continue to be \neffective, making the permanent Mortgage eligible for\
      \ FHA mortgage insurance. \n(B) A disclosure issued to the Borrower explaining that the Mortgage\
      \ is not eligible \nfor FHA mortgage insurance until after a final inspection, or the issuance of\
      \ a \nCertificate of Occupancy (CO) by the local governmental jurisdiction, whichever \nis later.\
      \ \n(C) Either a fully executed contract agreement between the builder and the Borrower, \nwhich\
      \ includes the contractor’s price to build; or documentation of the actual \ncosts of construction\
      \ where the Borrower is acting as the general contractor. \n(D) Documentation of land acquisition\
      \ or land ownership. \n(E) A payoff statement and evidence of the actual payoff if mortgage proceeds\
      \ are \nused to purchase or pay off debt on the land. \nix. Escrow Account \nAt closing, after funds\
      \ are disbursed to cover the purchase of the land, the balance of the \nmortgage proceeds must be\
      \ placed in an escrow account to be disbursed as construction \nprogresses. \nThe Mortgagee must\
      \ obtain the Borrower’s written authorization for each draw prior to \ndisbursing funds to the contractor.\
      \ \nAfter completion of construction, the construction escrow account must be fully \nextinguished,\
      \ and any remaining funds must be applied to the outstanding principal \nbalance of the permanent\
      \ Mortgage. \nx. Required Documentation for Endorsement \nThe Mortgagee must comply with Required\
      \ Documentation for New Construction \nFinancing. \nThe following documentation is required for\
      \ Mortgage endorsement: \n\n \nThe Mortgagee must obtain a title update after conversion to the\
      \ permanent \nMortgage to show that the mortgaged Property is free and clear of all liens other\
      \ \nthan the Mortgage. \nThe Mortgagee must verify and document that the construction was fully\
      \ drawn \ndown and that any remaining funds were used to pay down the principal balance \non the\
      \ permanent Mortgage. \nxi. Endorsement \nThe Mortgage must be endorsed within 60 Days of the final\
      \ inspection or issuance of the \nCertificate of Occupancy (CO), whichever is later. \nxii. Start\
      \ of Amortization \nAmortization of the permanent Mortgage must begin no later than the first of\
      \ the month \nfollowing 60 Days from the date of the final inspection or issuance of the CO."
    drafter_attestation: Verbatim section from snapshot 8c03836f77f317e1; boundary human-curated + substring-verified
      (2026-07-23).
  judgment: false
