Part 2 – USDA Construction Loans: What costs can be included within a USDA Construction Loan?
What costs can be included within a USDA Construction Loan in Florida, Texas, Tennessee, and Alabama?
What are USDA Single-Close Construction Loan requirements? Can you buy land and build a home with a USDA No Down Payment Construction loan?
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!
Remember, we are know for returning calls, replying to your emails, and responding to messages. Just call, text, or email with your scenario so we can show you the Metroplex difference!
What costs can be included within a USDA Construction Loan?
As a starting point, we commonly receive the following questions:
- What costs can you include within a USDA Construction Loan?
- Can you buy land and build a home with a USDA No Down Payment Construction loan?
- Can you build on land that you already own or purchase land with proceeds from the construction loan?
The USDA Single-Close Construction to Permanent No Down Payment loan is eligible for new single-family residences, modular, and manufactured homes and allows for draws during the construction phase which occurs after closing.
Additionally, it provides tremendous flexibility because you may either build on land that you already own or purchase land to be built on through the USDA construction loan.
USDA Construction Loan Building Guidelines
Further, unlike other programs which only allow loan amounts based on the sales price, USDA home building loan guidelines will permit financing of loan-related costs up to the appraised value of the property, with examples of those eligible costs being:
- Acquisition cost of the land.
- Land may be purchased separately from a third party or directly through the builder contract.
- If land is purchased separately, the seller would receive their proceeds at closing as normal.
- Payoff the balance of land to be utilized in the construction of the dwelling.
- If the land was previously purchased and has an existing loan, funds may be used to pay off the outstanding balance owed with the remaining loan proceeds used for construction costs.
- Acquisition cost of the land.
- Construction Hard Costs
- Costs inside the contract to be detailed on the construction budget agreed upon by the builder and borrower;
- Costs outside of the contract, paid to subcontractors, for contributive work such as well and septic installation, roads/driveways, utility hookups, landscaping, etc.
- Construction Soft Costs
- Contingency Reserve;
- Interest Reserve;
- Survey, Permits, Plan Review Fees, Title Updates, Project review fees, and more.
In summary, please note that this is not an all-inclusive list of eligible costs, it does demonstrate the high amount of flexibility found under the USDA Single-Close New Construction to Permanent program. While you are not able to purchase raw land on its own, No Down Payment financing allows for the purchase of land along with funding for the construction of a primary residence all with the convenience of one closing prior to the construction starting.
But, before we go, I just want to thank everyone for continuing to make us your USDA lender of choice.
As a USDA Approved Lender, we will walk you through the USDA loan qualifying process step-by-step. Just call, text, or email to discuss your scenario and let us show you the “Metroplex” difference!
800-806-9836 Ext. 280
Thank you again for forwarding and sharing today’s video with any friends, family, co-workers, or clients who are looking to buy, sell, or refinance!
As always, I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!
P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.