USDA Single Close Construction Loans

When you find the perfect property where you want to build your home, it’s an important project to take on. Making smart decisions at the start of the process will set you up for success so that you can make your dream a reality.

With a USDA single close construction loan, you can save time and money through a simplified financing process designed specifically to streamline building a new home in a rural area.

What is a USDA Single Close Construction Loan?

Financing a home in a rural area involves unique considerations. If you also want to build a home, there are even more complex factors involved in the overall process, especially to secure financing. 

To make it easier for homebuyers to finance homes and increase economic development in rural areas, the United States Department of Agriculture (USDA) provides the USDA single close construction loan.

With a USDA single close construction loan, you can finance the purchase of your lot, the construction of your new home, and the long-term mortgage that will be needed to afford your home once it’s built.

This streamlines the process, allowing you to close on your home loan once, rather than having to secure two or more separate loans for each stage of the process.

You qualify once and have a single appraisal, loan originator, and closing process. This reduces the time it takes to build and move into your new home, it protects you from unforeseen circumstances down the road and saves you from paying double the closing costs.

The USDA single close construction loan in particular also has a competitive interest rate and no down payment requirement, making it a popular option for rural construction projects.

Home construction is complicated and requires many moving parts. Single close construction loans are made to help simplify the process.

How to Get a USDA Single Close Construction Loan

If you’d like to see whether you qualify for a USDA single close construction loan, connect with us. To get you started, we’ve outlined the steps and qualifications needed to help you understand the process.

The Financing Process

By sharing basic information about the home you want to build, we’ll work with you to see if a USDA single close construction loan meets your needs and whether you can get pre-approved for the loan.

Next we’ll begin a more in-depth underwriting process to review your income, credit, ability to repay the loan, and other eligibility requirements. We’ll also work with you and your builder to determine what the cost and timeline will be to build your home and finance it.

We’re with you through each step, leading to a simple and efficient closing so that you can move forward with building your home.

Once the loan closes, you’ll begin construction on your new home within 30 days of the closing date. Your construction team will provide you with regular updates on the progress of your home. We’ll manage the construction phase, including ordering draw inspections, any state-required surveys and inspections, and USDA requirements.

Loan Requirements to Meet

These are some of the standard requirements often needed to qualify for a USDA single close construction loan. If you have questions about these requirements, we’re here to help.

  • You need to live (or be building a home) in an eligible rural area as designated by the USDA.
  • In most cases, it’s best to have a credit score of 640 or higher. With higher credit scores often comes better interest rates.
  • The USDA and the lender must approve any contractors that will be used.
  • Contractors must have appropriate liability insurance, have an active license, and have at least two years of experience constructing family homes.
  • An appraisal will need to be done to assess the value of the project.

USDA Single Close Construction Loan FAQs

Financing the build and long-term mortgage of your new home is an important step in beginning this process. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.

Do I need a down payment for a USDA single close construction loan?

Required down payment amounts vary depending on the type of loan you want. With a USDA single close construction loan, we don’t require any down payment because the loan has a 100% Loan-to-Value (LTV) ratio.

In comparison, our other single close loan programs offer down payments anywhere from 0-3.5% to a maximum of 5%. This is a small fraction of what other lenders typically ask for with traditional construction loans, which require a down payment of around 20% to get the best loan terms.

What costs are required to close a USDA single close construction loan?

There are closing costs associated with processing any loan, and the costs of a single close construction loan are comparable to standard mortgages. They include costs for the lender to service the loan, as well as an appraisal and other fees.

With a single close loan, you only pay closing costs once and your closing package includes a single promissory note and one deed.

This is a unique benefit that many other financing options for home building don’t offer. With other loan types, borrowers often need two or more loans to finance the actual build and their long-term mortgage, meaning they pay closing costs for each of those loans.

How do USDA single close construction loan interest rates compare to other construction loans?​​

Interest rates for USDA single close construction loans vary based on a variety of factors including your income and finances, credit score, the location where you want to build, and loan amount.

To know what interest rate your situation would qualify for, get in touch with one of our loan advisors for more specific information.

How does my lender get involved with the construction of my new home?

We have an in-house single close construction management team. Using our years of experience and home-building expertise, our experts — with support from the USDA — will review and approve documentation from every stage of construction.

This includes project budget and timeline, planning and specifications, permits and inspection, and building code best practices.

At the start, you’ll want to find and engage the builder of your choice as long as they meet the quality standards for the USDA program. Our builder vetting process ensures that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are top priorities.

Our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.

Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. The documentation you might need in the future is centralized all in one place.

What other loan options are there besides a USDA single close construction loan?

A USDA single close construction loan is only one of the many options for those who are interested in building their own home.

Some additional options you might want to consider include other specialized construction loans. This includes loan programs for veterans, active-duty military, and spouses through the VA.

An FHA loan might work well for building a home that isn’t in a rural area like the USDA loan is meant for. Or there are Fannie Mae construction loans designed for people with low-to-moderate-income levels.

We can help you determine what loan program is best for your situation.