USDA Construction-to-Permanent Loan Lenders: A Complete Guide

The USDA’s construction-to-permanent loan program allows borrowers to finance the construction of a new home and convert it into permanent financing with one loan This streamlines the process and saves on closing costs But you need the right lender to make it happen.

In this guide, we’ll explain what USDA construction-to-permanent loans are, their benefits, and how to find participating lenders who offer these specialized mortgages.

What Are USDA Construction-to-Permanent Loans?

USDA construction-to-permanent loans, also called USDA One-Time Close loans, allow you to build a new home and establish permanent financing with a single mortgage and one closing.

With a traditional construction loan, you would need two separate loans – a short-term construction loan to finance the building phase, then a permanent mortgage after completion. The construction-to-permanent option combines both steps.

How It Works:

• The lender provides one loan to cover construction costs and the final mortgage.

• You only go through one closing before the build.

• Once construction is finished, the interim construction financing converts into a permanent USDA mortgage.

• This eliminates the need for a second closing or application.

In addition to the convenience, these USDA loans provide two other major benefits:

1. Cost Savings – You avoid paying closing costs twice, which saves thousands in lender fees and prepaids.

2. Interest Credit – USDA provides an interest credit, reducing the rate during construction by 2% to make payments more affordable.

But specialized lenders are required, since not all participate in this program.

Benefits of USDA Construction-to-Permanent Loans

Let’s take a closer look at why these loans are advantageous for building a rural home:

• One closing – Complete financing upfront and skip a second separate closing.

• Lower fees – Pay lender closing costs once, avoiding duplicate expenses.

• Single application – Get approved once for the full construction and mortgage.

• Interest credit – USDA subsidizes the rate by 2% during the construction period.

• Fixed interest rate – Your permanent financing rate remains fixed for the full term.

• No downpayment required – 100% financing means no out-of-pocket funds needed.

• One process – Manage the entire build and mortgage with a single lender contact.

• Designed for custom builds – Ideal financing solution for new construction homes.

For eligible borrowers building in rural locations, the streamlined process and savings make construction-to-permanent loans an excellent financing choice.

Finding USDA Construction Loan Lenders

USDA works with approved program lenders nationwide to offer construction-to-permanent financing. Here are some tips for finding the right lender:

• Check USDA’s lender list – USDA publishes a list of approved lenders offering these loans.

• Search mortgage platforms – Online sites like LendingTree allow you to compare multiple lender options.

• Ask local lenders – Connect with lenders in your area to ask if they handle USDA construction loans.

• Work with brokers – Mortgage brokers can shop rates on your behalf.

• Look for experience – Opt for a lender well-versed in the USDA construction loan process.

We recommend getting quotes from at least 3 lenders to find the best rates and fees. Look for responsive lenders familiar with these specialized loans.

Top USDA Construction Lenders

While availability varies by location, here are some of the top national lenders known for USDA construction-to-permanent lending:

• 1st Signature Lending – Offers in AL, CO, FL, GA, IN, KY, NC, OH, PA, SC, TN, TX, VA, WV.

• AmeriFirst Financial – Serves FL, IN, KY, MI.

• American Financial Resources – Operates in 48 states.

• Atlantic Bay Mortgage Group – Covers DE, FL, GA, IN, KY, MD, NC, SC, TN, TX, VA, WV.

• Assurance Financial – Based in LA but has national reach.

• Evergreen Home Loans – Services AZ, CA, ID, MT, NV, OR, TX, WA.

• Lake Michigan Credit Union – Focuses on MI but open across the U.S.

• Stockton Mortgage – Specializes in KY and surrounding states.

• VIG Mortgage – Top lender for PR.

Again, geographic availability varies. Connect with multiple lenders to uncover the best fit.

The USDA Construction Loan Process

If you’re ready to build with USDA financing, here is an overview of the process:

1. Get pre-qualified – Confirm eligibility and lendability before house plans.

2. Submit plans/specs – Provide detailed home plans and specifications to lender.

3. Apply for loan – Complete full application with income, assets, credit info.

4. Loan approval – Lender underwrites and secures USDA commitment.

5. Closing & groundbreaking – Initial single closing finalizes construction financing.

6. Construction – Builder completes home per approved plans and timeline.

7. Draw inspections – USDA inspects to approve each construction draw.

8. Conversion to permanent loan – Construction financing converts to permanent mortgage after completion.

It takes strong collaboration between you, the lender, and builder throughout the construction phase. Your lender will help guide you through each step.

Pros and Cons of USDA Construction Loans

Pros:

• One loan, one closing
• Lower fees and costs
• Fixed low interest rate
• No downpayment requirement
• Interest credit provided
• Streamlined process

Potential Cons:

• Limited geographic availability
• Restricted to rural properties
• Home must be primary residence
• Limited customization during construction
• Extra costs if construction timeline delayed

For most borrowers, the pros outweigh the cons. But careful budgeting and communication are vital for a smooth construction process.

Is a USDA Construction-to-Permanent Loan Right for You?

If you’re looking to build a home in an eligible rural area, a USDA One-Time Close loan can make financing much easier. The single-close construction loans help you save on costs and paperwork.

Connecting with experienced USDA lenders is the key first step. They can guide you through requirements, timelines, and each building phase. With proper planning, you can realize your dream home with hassle-free USDA financing.