USDA New Construction Loan | Requirements & Guidelines
Looking for a USDA new construction loan without having to pay closing costs twice? This USDA new construction loan allows you to finance the lot, construction costs, and permanent financing all in one loan. You do not have to pay for a second appraisal, re-qualify for permanent financing, or incur additional costs due to the USDA new construction loan requirements.
You do not have to worry about re-qualifying or incurring additional costs on permanent financing because the permanent loan is closed before the construction begins. This simplifies the process through a streamlined USDA new construction loan.
Key Factors – USDA Loan for New Construction
- Closing costs are reduced due to the nature of the single closing.
- Loan closes prior to construction, which no re-qualification is required after construction is complete.
- No mortgage payments are due until the construction is complete.
- Streamlined process.
- Interest rate is locked prior to construction.
Eligible properties include new site stick-built homes, new manufactured, and modular homes.
Ineligible property types include multi-units, condominiums, single-wide manufactured homes, attached or semi-detached, or unique construction types.
Land can be purchased, gifted following USDA gift guidelines, or owned.
USDA New Construction Requirements
- 100% loan-to-value in USDA eligible areas up to the USDA area loan limit.
- Owner occupied properties only.
- Guaranteed Underwriting System (GUS) approved findings, which needs to be run to determine your eligibility for a loan.
- Debt-to-income ratios are determined by GUS.
- Must meet the USDA income limits.
- Minimum FICO credit score of 620.
Builder/Retailers are not required to have a bridge loan for construction, which often requires larger down payments and offer less favorable interest rates. The borrower does not have to re-qualify – reduces the chances of a borrower’s current credit situation changing during the construction process.