Who Offers USDA Construction Loans in 2023? A Guide to Finding the Right Lender

USDA construction loans allow buyers to purchase land and build a home in one loan. They combine financing for the land construction costs and a long-term mortgage. This streamlined process means you only go through one loan application, underwriting, and closing.

But not every mortgage lender offers USDA construction loans. Despite the many benefits, these niche loans can be hard to find. So who actually provides USDA construction financing? And how do you track down the right lender?

In this guide, we’ll cover:

• What is a USDA construction loan and how does it work?
• Benefits and drawbacks of USDA construction loans
• Average interest rates and fees
• List of lenders currently offering USDA construction loans
• Tips for finding and choosing a lender
• Alternatives if you can’t find a USDA construction loan

Overview of USDA Construction Loans

USDA construction loans are backed by the U.S Department of Agriculture They fall under the USDA’s Single Family Housing Guaranteed Loan Program.

With a USDA construction loan, you can:

• Buy land to build on
• Finance all construction costs
• Obtain a permanent mortgage once building is complete

It’s essentially three loans in one – a lot loan, construction loan, and long-term fixed rate mortgage.

USDA construction loans offer two major perks:

No down payment – You can get 100% financing and not put any money down.

One set of closing costs – You only pay closing costs once since it’s a single closing.

However, USDA construction loans come with strict borrower, property, and contractor requirements. We’ll cover these in more detail shortly.

First, let’s look at the benefits and downsides of USDA construction loans. This will help you decide if one of these niche mortgages is right for your situation.

Pros and Cons of USDA Construction Loans

Benefits

• One loan – Simplified process with single application, underwriting, and closing
• One monthly payment – Single payment covers land, construction, and mortgage
• No downpayment – 100% financing available
• One set of closing costs – Only pay costs once for entire process
• Delayed payments – No mortgage payments due during construction

Drawbacks

• Hard to find – Not many lenders offer this product
• Strict requirements – For borrower, property, and builder
• Higher rates – Interest rates typically exceed conventional loans
• Long process – More complicated so takes longer to close

As you can see, USDA construction loans offer clear benefits. But the drawbacks mean they won’t be the right fit for everyone.

Next let’s look at interest rates, fees, and costs.

USDA Construction Loan Rates and Fees

Interest rates on USDA construction loans tend to run higher than rates for conventional mortgages. Rates can also vary significantly between lenders.

According to loan data compiled in January 2023:

• Average USDA construction loan rate – 7.25%
• Range of rates – 6.25% to 8.25%

In addition to higher rates, you’ll pay the following fees:

• Upfront guarantee fee – 1% of the loan amount
• Annual fee – 0.35% of the loan amount (divided into monthly payments)
• Other closing costs – Appraisal, credit report, title fees, etc.

Now let’s look at the specific lenders currently offering these niche construction loans.

List of USDA Construction Loan Lenders

Only a small subset of lenders provide USDA construction financing. Here are a few top lenders to consider:

1st Signature Lending

Locations: AL, CO, FL, GA, IN, KY, NC, OH, PA, SC, TN, TX, VA, WV

Phone: (317) 893-3798

AmeriFirst Financial Corp.

Locations: AZ, CA, FL, IN, KY, MI, NV, NM, OR, UT, WA

Phone: (850) 926-4044

Atlantic Bay Mortgage Group

Locations: DE, FL, GA, IN, KY, MD, NC, SC, TN, TX, VA, WV

Phone: (757) 213-1660

Bankwest Inc.

Location: SD

Phone: (605) 224-7391

Evergreen Home Loans

Locations: AZ, CA, ID, MT, NV, OR, TX, WA

Phone: (425) 974-8500

Flat Branch Mortgage

Locations: AR, IL, KS, MO, OK

Phone: (314) 872-0998

GSF Mortgage Corp.

Locations: AL, AR, KS, LA, MI, NC, OR, WA, WI

Phone: (262) 373-0790

Stockton Mortgage Corp.

Location: KY

Phone: (502) 227-1100

This is not an exhaustive list, but provides a starting point of top lenders offering USDA construction financing.

I recommend calling each lender to confirm they currently offer these loans in your state. Availability can change.

How to Find and Choose a USDA Construction Lender

Finding lenders for niche loan programs can be challenging. Here are some tips on locating and picking the right USDA construction lender:

• Ask around – Talk to real estate agents and builders familiar with USDA loans
• Search online – Look for “USDA construction lenders near me”
• Check USDA site – The USDA lists approved lenders by state
• Call local banks/credit unions – Even if not advertised, some offer USDA construction loans
• Compare multiple lenders – Rates, fees, and closing timelines vary

When choosing a lender, look for an experienced team familiar with the USDA construction loan process. You want a lender who can guide you through the numerous requirements.

Also compare interest rates between lenders. Even a small rate difference can significantly impact total costs.

Lastly, ask lenders about their expected timelines. USDA construction loans can take 60+ days to close. Make sure the lender’s projections work with your construction schedule.

Alternatives if You Can’t Find a USDA Construction Loan

If you strike out finding a USDA construction loan lender, don’t fret. You still have alternatives for financing land purchase, construction, and a mortgage.

Here are a few options to consider:

• VA construction loan – For veterans and service members
• FHA construction loan – From a 203k or One-Time Close lender
• Conventional loan – Combines lot, construction, and mortgage
• Separate loans – Individual loans for land, building, and mortgage

Talk to a few lenders to discuss which alternative loan programs work for your financial situation.

The right construction loan depends on your location, budget, credit, and down payment funds. But with so many options available, you can certainly find a loans that fits your needs.

Find the Right USDA Construction Loan Lender

USDA construction loans provide a streamlined way to buy land, build a home, and get a mortgage. But finding a lender offering these niche loans can be difficult.

In this guide, we looked at top lenders providing USDA construction financing across the country. We also covered how to search for and select the right lender for your situation.

While rare, USDA construction loans remain an excellent option for qualifying borrowers. Take the time to seek out lenders offering these affordable mortgages. The extra effort can pay off with your dream home.