The "USDA" One-Time-Close Loan
UDSA Loans to build a home are issued by private lenders and guaranteed by the USDA, including the USDA's One-Time Close Construction-to-Permanent Loan option. Borrowers applying for a Single Close Loan benefit from having one closing, no requalification requirement, and receiving a loan note guarantee before construction begins.
While there is no required down payment on a USDA loan, you will need to meet all other requirements set by your lender and the USDA in order to qualify for a One-Time Close loan.
What is a USDA Loan?
The United States Department of Agriculture (USDA) is a government entity that provides leadership on food, agriculture, natural resources, rural development, nutrition, and related issues. The USDA's Rural Department aims to build healthy and sustainable rural communities by helping low- and moderate-income residents find safe and affordable housing.
It is able to do so with the Single Family Housing Guaranteed Loan Program. Officially known as Section 502, the USDA offers a zero-down mortgage option to residents who wish to build or purchase homes in qualified, rural, or suburban areas.
What Can You Build With a USDA Single Close Loan?
The USDA's goal is to strengthen the economies of rural communities by helping people buy and build homes. The USDA deems an area “rural” if it has a lack of mortgage credit for low- and moderate-income families and a population under 35,000. Any borrower applying for a USDA Single Close loan must live in such an area with the intention of occupying the new home as their primary residence. Eligible property types include new manufactured homes (excluding single wide homes), modular homes, and site-built homes, all of which must be one-unit homes.
Who Can Apply
On USDA One-Time Close loans, lenders offer a 30-year, fully amortizing mortgage, but the construction term is inside of the mortgage term, so all borrowers typically must qualify for a 29-year loan. *Annual fees will typically be escrowed to cover the construction period for up to 12 months.
As the USDA's goal is to assist low-to-moderate income homebuyers, it sets income limits based on the property's location and household size. For 2020, except for designated high cost areas, the income limits are set at $86,850 for a 1-4 person household, and $114,650 for a 5-8 person household.
Remember that all credit and verification documents must be dated within 120 days of the original closing date to be valid, and all appraisals are valid for 150 days.
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