Part 1 – USDA Construction Loans: How do you qualify for a USDA Construction Loan in Florida, Texas, Tennessee, and Alabama?

How do you qualify for a USDA Construction Loan in Florida, Texas, Tennessee, and Alabama?

What are USDA Single-Close Construction Loan requirements?

As a USDA construction loan lender, we receive numerous questions on this topic and in today’s short video, I will give you an introduction to the USDA one-time close construction loan process and explain how it can be possible to build a home with no down payment!

Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.

How do you qualify for a USDA Construction Loan in Florida, Texas, Tennessee, and Alabama?

USDA construction loans fall within the Combination Construction to Permanent Loans section of the 3555 USDA Handbook which provides for the following description of their USDA Single-Close feature:

“A single-close loan combines the features of a construction loan, which is a short-term interim loan for financing the cost of construction, and the traditional long-term permanent residential mortgage.”

Once an eligible applicant has been properly qualified, here is what can be expected under the USDA Single-Close program:

1. Look for land and work with a builder on construction costs to fit their budget
2. Once land and builder have been selected, the appropriate contracts would be executed
3. This would be followed by loan application, appraisal, underwriting, and obtaining the USDA commitment
4. Once all conditions are satisfied then the closing is scheduled.
5. Builder/Contractor must meet USDA eligibility requirements and be approved prior to closing
6. Remember, closing occurs prior to the start of construction with the single-close program and because there is only one closing this saves substantial costs.
7. At closing, funds are disbursed to cover land acquisition, construction costs, and permanent mortgage funding.
8. Construction begins and draw payments are administered as the build-out progresses

USDA Construction Loan Summary:

No Down Payment! – While many banks require a 20% down payment for a construction loan, USDA loans allow for “No Down Payment” which is the same for both existing and new construction homes.

USDA Eligible Areas – USDA qualifications for property location eligibility remain the same, which means that the property must be located within a USDA designated eligible area.

USDA Income Limits – USDA has county income limits which are based on household size. These will still apply as they do with existing construction home. However, remember that USDA has recently increased these county limits which allows for increased income limits which can work with on a variety of price ranges.

Flexible Credit Qualifying – Although minimum credit qualifying conditions must be met, the USDA program offers extremely flexible credit qualifying with reduced waiting times for prior bankruptcies, foreclosures, and short sales when compared to conventional underwriting guidelines.

As with any home purchase, understanding your budget upfront is always critical so getting properly qualified by an approved USDA Approved Lender is a the crucial step that helps to iron out details such as monthly payment, construction budget, and land costs.

Remember to just call, text, or email to discuss your scenario and let us show you the “Metroplex” difference!

Call/Text: 863-593-2001
(800) 806-9836 X 280
SeanS@MPLX.org

Thank you again for forwarding and sharing today’s topic with any friends, family, co-workers, or clients who are looking to purchase or build a home!

P.S. – Click here to download your FREE USDA Blueprint for Success!