Through the USDA’s combination construction-to-permanent loan, or single-close loan, homebuyers wishing to build a home with a USDA loan can do so. The single-close loan combines a construction loan, or interim financing, with a traditional 30-year fixed USDA loan.
The primary benefit to homebuyers with a single-close loan is that there is only one closing, saving the homebuyer a considerable amount in closing costs. Additionally, with a USDA single-close loan, the lender receives the loan note guarantee before construction begins, creating added confidence.
To ensure success, the USDA requires that the lender approve any builders or contractors you wish to use. In order for the contractor or builder to be eligible to build your home using the USDA loan they must:
If you have trouble finding a homebuilder who meets the above requirements, your lender may be able to help.
With a USDA construction loan, your lender is responsible for managing the disbursement of the loan proceeds to the homebuilder or contractor for costs associated with the home.
Loan costs that are covered by the USDA single-close loan include:
Additional costs that may be paid for with your USDA construction loan also include items such as surveys, permits, appraisals, inspections, architectural design plans, plan reviews and lender construction administration fees.
As with any USDA loan, the homebuyer must meet income and eligibility requirements and the property must be in a USDA approved location. However, there are some additional stipulations, which include:
To learn more, contact a home loan specialist today.