USDA One-Time Close Construction Loan, Benefits, Eligibility Criteria and Requirements
The USDA One-Time Close Construction Loan simplifies homebuilding with one loan for land purchase, construction, and mortgage financing.
by P Nandhini
Updated Apr 04, 2024
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USDA One-Time Close Construction Loan
The USDA One-Time Close Construction Loan is a loan that makes it simpler for people who want to construct their own house. You don't have to worry about getting different loans for buying the land, building the house, and getting a contract for this loan. Everything is combined into one loan, which makes the entire process easier.
This loan is great for people who want to construct a new house from scratch without having different loans and closings. The best part of the USDA One-Time Close Construction Loan is that you have to go through one closing only. You can start paying back the loan once the construction is completed.
Also, you can get this loan even if you have a little money saved up for a down payment. So, if you're dreaming about building your own house, then the USDA One-Time Close Construction Loan will be a great choice to make that dream a reality.
What are the Benefits of USDA One-Time Close Construction Loan?
1. One-Time Closing:
You are required to go through only one closing process USDA One-Time Close Construction Loan. This means you won't have to deal with the problem and cost of closings like you would with other types of loans. Everything from buying the land to building the house and getting the contract is combined into one convenient closing.
2. Low Down Payment:
You may be able to get financing for up to 100% of the home's value, which means you might buy your new house with no down payment at all.
3. Fixed Interest Rates:
Your interest rate is locked in, once you close on the loan. So your monthly contract payments will remain the same through the life of the loan, giving stability and predictability.
4. No Re-Qualifying:
You won't have to go through the problem of re-qualifying for a permanent contract after the construction is finished. This saves time and pressure and helps you to enjoy your new house.
Eligibility Criteria and Requirements for USDA OTC Construction Loan
| Eligibility Criteria/Requirements | Details |
|---|---|
| Builder Contract | Work with a licensed general contractor |
| Property Ownership | Purchase or own the land or property |
| Escrow Account | The remaining mortgage funds were placed in escrow |
| Amortization Schedule | Repayment begins within 60 days after the final inspection or Certificate of Occupancy |
| Maximum Loan Amount | Varies by location |
| Minimum Credit Score | FICO score of at least 640 |
How to Get a USDA One-Time Close Construction Loan?
Pre-Approval: Begin by getting pre-approved for the loan to make sure you meet the necessary income and credit requirements.
Find a Contractor: Choose a licensed contractor who will oversee the construction of your house. The lender will be required to approve the contractor.
Select a Property: Choose the location for your home and make sure it meets USDA eligibility criteria.
Submit Project Details: Your contractor will give the lender construction plans and cost estimates. The lender will audit these and process the loan accordingly.
Closing: You'll go through a single closing process where you'll give any required down payment and closing costs will be handled once everything is arranged.
Construction Begin: After closing, construction can be started on your new home.
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