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Part 3 – USDA Construction Loans: How can you build a home with a USDA Construction Loan?

March 24th, 2023 by Sean Stephens

What Type of Home Can you build with a USDA Construction Loan in Florida, Texas, Tennessee, and Alabama? What are the different ways you can build a home with a USDA new constructionWhat can be included with a USDA Single-Close Construction Loan in Florida, Texas, Tennessee, and Alabama? loan?

Last week we discussed how flexible a USDA Construction Loan can be with land, and in the next part of our series, I will explain what types of homes are eligible to be built with a No Down Payment USDA singe-close construction loan.

Before we get started, if you have USDA loan eligibility questions and are looking to be qualified, make sure you are working with an experienced USDA Approved Lender such as Metroplex Mortgage Services.

Just call, text, or email to start the conversation and let our USDA lending experience go to work for you!

Call/Text: 863-593-2001
800-806-9836 Ext. 280

As a starting point, USDA guidelines define a new dwelling as one that is “under construction” to be built or a “dwelling that is less than one year old and has never been occupied.”

Additionally, although we are able to work with the USDA Single-Close No Down Payment construction to permanent feature which has an upfront closing with draws then provided to approved builders for the construction of the home, today’s topic will focus on what some may refer to as an “end loan” because it would be used to pay off any construction loan that the builder may have taken out to finance the construction of the property.

In this type of scenario, the builder is able to fund the construction of the property whereby Metroplex would then be responsible for establishing the permanent residential USDA mortgage at closing after the home has been completed.USDA New Construction Loans for Sebring Florida, Texas, Tennessee, and Alabama

In what situations would a USDA “end loan” apply?

In some cases, a builder has their own funding sources set up and does not want to go through an approval process as required under the USDA Single-Close feature and elects to instead complete the construction of the home with their own funds and then receive their construction proceeds at time of closing.

Additionally, if a builder has a spec home that is under construction and a buyer contracts with them to build the home, the USDA Single-Close feature would not be available since the home has already been partially constructed. In this scenario, the builder will complete the construction and then receive payment at closing as discussed above.

What are the pros and cons of this type of USDA construction loan financing?

Unlike the USDA Single-Close Construction Loan feature where the interest rate, credit, income, and qualifying has been established at the upfront closing and then draws are disbursed thereafter for the construction of the home, end loan financing requires a different approach due to completion of the home sometimes being months after the initial contract.

In these type of situations, it requires lenders to be diligent about monitoring expiration dates of the appraisal along with the borrower’s income, assets, credit, and employment.

However, because of our proven track record, we have established procedures in place to monitor the loan file and be as proactive as possible during the construction period.

Key Points – USDA New Construction HomesCan a USDA Loan be Used to Buy a New Construction Home?

As you can see, a USDA loan be used to buy a new construction home! However, it is important to ask your builder how they are structured. Will they need you to close on a construction loan in order to then receive draws to build the home or do they have their own financing where they can build the home which would allow you to wait until closing for your USDA loan to be established.

Please note that everyone’s situation is unique such as a fingerprint, so please reach out to my team for any specific questions regarding USDA new construction loans.

Remember, we are known for our USDA loan expertise – 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 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.

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