USDA Construction Loan Requirements | How to check your eligibility and get approved
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- เผยแพร่เมื่อ 29 มิ.ย. 2024
- How the USDA construction loan works and what requirements need to be met. Today we have special guest David Corwin, from the USDA here to tell us exactly how this works.
This is a one time construction loan, which means you do not have to pay closing costs twice.
With the USDA construction loan, during the construction of the home, the payments can be rolled into the loan.
I learned a ton talking with Dave, and I hope you do too.
I feel like this is a great opportunity to remove yourself from the insane bidding wars in today's existing home market, and at least consider building if you are eligible.
Please drop a comment below with any questions you have.
You're welcome to shoot me a direct inquiry here as well: balanceprocess.com/contact
Important USDA links below:
Income limits: www.rd.usda.gov/files/RD-GRHL...
Location eligibility: eligibility.sc.egov.usda.gov/...
Check out the podcast:
Apple podcasts: podcasts.apple.com/us/podcast...
Spotify: open.spotify.com/show/6RbTXxX...
Audible: www.audible.com/pd/Podcast/B0...
Amazon: music.amazon.com/podcasts/68e...
Stitcher: www.stitcher.com/show/mortgag... - แนวปฏิบัติและการใช้ชีวิต
I had just about given up hope on building a home on my 11 acres until I watched this video. I feel like there is still hope. Bless you for this.
😊
My husband and I are looking into this! Thanks so much for the info!
Absolutely!
this show was very informative. did a good job on covering the necessary information without dragging it out, and simply explained. it’s a good guide to understanding the program. i’ve seen not so good ones.
Thank you!
This is great info, thank you! Always been a dream one mine to build.
Go for it!
This was the best info I have heard to date about this type of loan thanks.
Glad it was helpful!
This was really helpful, thanks so much!
😎
Just found your channel and didn’t know these programs even existed. Been saving seems like forever for a home. Definitely looking into this option. Thanks for helping those who feel defeated in owning a home again.
Absolutely
Also there is modular companies that sell homes from their lots so they will deliver and set up in 90 days or less for that roll over mortgage.
Tell me more please. Can you give me at least 2 companies?
Yeah we definitely need those company names.
Interested too!
Great information!!!!!
Thanks for sharing!
Very helpful video. Thanks!
Thank you
This is great info ..thank u for posting !!!
Absolutely. Thank you!
Thank you for the information.
Wonderful job. Gained a new follower. 👍🏽
Thank you!
Thank you Mr Lesner. I have been looking into buying a home for the passed 3 years and with the outrageous sellers market this is definately something to look into and thank you Mr. Dave. Im on Guam and its the most challenging out here with the least lender option that does this type of lending. Thank you.
Glad you got something out of it.
Wow. What a great video. No fluff, just straight to the point. Would you consider doing a deep dive video that goes into using a VA home loan for the purchase of land and building a home. There’s a lot of videos about using the VA home loan to purchase a home, but not many that cover the process of buying land to build your own home.
Some of the questions I personally have are:
1) Do loans for buying land and building have the same limit as loans used to buy an already built home?
2) What is the timeline from buying the land to building the home?
3) If there’s a specific plot of land i want to buy, when should I be making contact with the owner to figure our if they are willing to sell?
4) At what point do I look for and hire an architect?
5) Should I consider a VA home loan or a USDA construction loan?
6) What are the differences between these two loans (pros, cons, things to keep in mind, etc)?
7) Does using a USDA construction loan have any impact on using the VA home loan in the future?
8) What ratio should I keep in mind to split the loan for buying the land and building the house (40% Land & 60% building?, 70% land & 30% building, etc.)?
9) Is it possible to buy a 7 acre plot of land to build a modest home?
10) Would it be possible for you to put together a basic roadmap to help guide the process of buying land and building a home (whats is the first thing you should do, look for a lender, land you want to buy, etc.)?
Thank you for making this content its been very informative. I look forward to seeing what other topics you cover in the future. You definitely earned a new subscriber today!
Yes, eventually I will do an episode with a VA rep who wants to discuss their VA construction loan. I'll wait till someone raises their hand to do so.
I know this is the way to go I been doing my homework on USDA home loans this program is perfect I think especially if its your first time buying a home its a big help.😁
Agreed!
nice job getting someone from the usda on.
Thanks. Yeah, he asked to be on the podcast, and I was of course interested, and I asked if it would be okay to record video so we could have it on TH-cam as well. Turned out that we (he) covered a ton of useful info in the conversation we had.
Very helpful thank you
Thank you!
So glad i found this video. Sign me up! Tired of trying and getting left out in the woods.
Awesome!
Great information!!! I am considering applying for this program.💪🏾💪🏾💪🏾
Awesome! Thank you!
Very good information thanks. I have to get to it I need a home for my family.
Absolutely!
Thank you, thank you, thankkk youuuu to the both of you gentlemen!!! I’ve been doing my own research on this loan and speaking with realtors who appears to not want to help with this type of loan so now I know I need to speak with a LENDER FIRST!!! This is the ABSOLUTE BEST video I’ve come across that answered every question I had and have been asking google and TikTok 😂 however I would also like to know if the lenders go by the “middle” credit score or your “mortgage score” ?
Middle mortgage score. Thank you!
thank you
Thank you!
Good. Thank you.
Thank you!
Thank u kindly for your enlightenments and knowledge God bless you guys and all 🌈❤️🌈
Thank you
This is all good news. I own land in a rural area and am below the income limit, Cullowhee NC. I'm excited to reach out to their approved lender list for construction to perm.
Sounds good!
Thank you
You're welcome. Thank you for watching!
The great thing about TH-cam is that the information is here for anyone. So no one can claim discrimination or racism. African immigrant on the way yo be selfmade millionaire. Only in the USA. GOD BLESS AMERICA
Thank you!
Oh well look at that TH-cam solved racism. All that was needed was open information.
Thank you for the information sir. My wife and I own a home, and are in the middle of closing on a new piece of land which qualifies for this loan. We were planning on trying to save the 20% down for a conventional construction loan, but if this is an option to expedite our build, we will certainly take a look at it.
Awesome!
Good information
Thank you!
@@MortgagebyAdam unfortunately I typed my lot’s address in . It’s in the small percentage that doesn’t qualify
@@BigTweez9 there are FHA construction loans as well. 3.5% down payment required on this product. Feel free to shoot me an inquiry and I'll connect you with our FHA construction loan guy. Inquire here: BalanceProcess.com/contact
This loan sounds great especially with no payments out of pocket and 2 years experience in construction and you can finance your land you already own.
Owner can't be the builder though.
Hey, friend! Great content. You and Mr. Corwin answered a lot of questions I had. But I still have a little confusion about qualifying for loan approval. You mentioned, and Mr. Corwin confirmed, getting pre-approved by a lender. Does this vary by state? Is there a form we need to fill out and send to an office of some sort? Or are we supposed to get pre-approved on the USDA website? I'm getting mixed information from different sites and friends (who didn't need construction). We have the land, inherited and paid for. We just need a house and driveway. We meet the eligibility requirements for our county. Thank you for all you do!!
Thank you Sarah. Yes, you can apply with us. Contact me here: BalanceProcess.com/contact
Really helpfully thank you! Question though, could the home you build be off grid? Solar.
Has to be a traditional built home
I own a 5 acre parcel outright, completely paid off in a rural area of the Pacific Northwest. Would the equity in my land count towards the liquid asset requirement?
The equity in your land would help with loan to value ratio and help cover your costs. There shouldn't be an asset requirement in this case.
Wow. This is one if not the most clear and informative videos regarding USDA CL. How you respond to all your comments!
Thank you for you time and providing such good information.
Been trying to figure out how to get started what was true or false! You did a wonderful job.
I do have a question. I'm relocating to GA, from Massachusetts. Would I search for a lender in MA or GA., or does it matter?
Thank you.
Thank you! You would want to work with a lender in GA. 😎
Thank you🌸
👊
OK info to apply
Inquiry received. Thank you.
Thank you both. If you get a direct loan thru USDA, since I'm not working with a lender, do I just find and qualify a builder on my pwn?
Yes, you find a builder on your own. If you're getting a direct loan, you need to get with a local USDA office to get pre-approved for their direct loan.
How does the interest RATE of a USDA mortgage compare to conventional? How much more does someone pay in rates?
Rates on construction loans are higher than regular existing home conventional loans.
I built a house through USDA-RD back in 2009. It was a very good experience.I had no problems. I sold it in 2019, I had it for 10yrs. I want to build again through USDA-RD here in the same town. Because home prices is just NUTS. I am retired now just received SS#. I'M afraid I will not qualify for enough amount to build. Just a simple 2 bedroom 2 bath about 1200sq ft. What do you think?
I think it's definitely worth looking into.
@@MortgagebyAdam Well ok I'll give it a try. I have no debt at all been debt free for 3yrs that was just the house. Otherwise it's been several years. I live within my means. I can stretch a penny into a $10.00 dollar bill. Thank you for your time.
I was approved last year home shortage, took 3 months to get approved this year more homes looking now not for new construction to purchase home already to move in that will come later I will live in my home sell or lease it out then do the new construction.
Roger that
When utilizing this loan, does this include picking out design options? Once the home is constructed.
Design options as in permanent fixtures, yes. But not furnishings.
@@MortgagebyAdam yes, design options as in counter tops, cabinets, etc?
For example if I’m approved for $300,000. Should I look to have a home built for about $280,000. Therefore, I’d have $20,000 for the upgrades/design options? Making the grand total $300,000.
@@stellaharris1367 Yes, you would work with your builder to select all the options.
hi ADAM , if you were to lose your job during the construction process , could you sell the build ,or is there a specific time period you must live in property before selling?
I mean I'm sure you could just get a new job
@@emilypearson4524based comment
There infinite "what if" scenarios. But once you close on your construction loan, there is no "re-approval" process unless you want to refinance.
I'm in Michigan as well
Go blue!
I called a bank on the USDA list of approved lenders and they said they do do construction loans. Is it specific banks that you have to find with in the list? Or is this just too new/not marketed well enough for the loan officer to know the process?
Feel free to shoot me an inquiry and I'll be glad to connect you with someone who does them. Please be clear on the inquiry that you're seeking construction financing so that I can point you in the right direction. Inquire here BalanceProcess.com/contact
I too was provided with that list by my local usda area technician Yolanda Arredondo. She was very informative but the lenders I called were all either clueless about this program, or attempted to convince me that banks do not typically do this type of thing. I’ve input an inquiry on the provided link but I appreciate the video and all the good information that was provided.
@@ohohohjfgfgdss inquiry received and responded to. Thank you for reaching out!
@@MortgagebyAdam Thank you so much!!!
Lots here go for $150k-$300k Could I build a home all in for $350k you think?
I'm not sure. You'd have to ask a builder.
Great info! I’ve done so much research and still… it’s not enough?
I want to have all in hand and ready! I found a list for new constructions loans and a realtor.
But feel that I’m not taken seriously!
It’s like, although USDA has a map of approved area’s, it doesn’t specify if there land there for sale! Then once there is land available, who’s to say “if the land is approved” as it may have problems.
There needs to be a team of all coming together, on behalf of a future homeowners, collectively! In my case? I would love step by step instructions…
Please excuse the frustration to all that are reading this..
Thank you and good luck to all!
Here is the process:
Get pre-approved
Get the builder approved
Get under contract on a lot
Get the loan structured with builder and lender
Once all of that happens, you will get in into process for full underwrite
Would this program work for a Mobile Home, Land purchase as well???? Thank you.
Manufactured, site-built, and modular homes are allowed.
How quick is the turnaround on the 502 construction loan one time close?
Here is the process:
Get pre-approved
Get the builder approved
Get under contract on a lot
Get the loan structured with builder and lender
Once all of that happens, you will get in into process for full underwrite and close in about 40-50 days.
Is the “construction loan” part of the “Single Family Housing Guaranteed Loan Program”?
Yes
If you are pre-approved by a lender already, do you tell them you want to do a usda construction loan or do you have to apply for usda first?
You tell your lender that you want to do a USDA Construction loan. If your current lender doesn't do them we can connect you with a lender who does. You're welcome to submit an inquiry anytime here: BalanceProcess.com/contact
@@MortgagebyAdam , Do you have to apply and be approved by USDA before you tell your lender about it?
Can you build a factory/manufactured home like a shipping container home (prefabricated in a factory and shipped to your land) using a USDA construction loan?
Shipping container home wouldn't be eligible.
@MortgagebyAdam I thought here in Atlanta a shipping container home falls under modular home. Are modular homes not ok under this loan?
Thanks for the information. I live in Florida . I just applied for the usda direct loan(502). How does that work if I want a new construction home? Will USDA have a list of builders? I know you mentioned this being the case if someone was to obtain the usda loan through a lender.
You're welcome! No, there isn't a list of approved builders. Check with your lender to see if they have a list of their approved builders.
@@MortgagebyAdam Well in the case of a direct loan, doesn't USDA themselves act as the lender?
@@avfpv157 for a direct loan, USDA funds it directly. here is everything you need to know on that: www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-direct-home-loans
@@MortgagebyAdam I thought with a usda direct loan the usda directly funds the loan themselves not a lender. Is this not true ?
@@actionjaxontoyvideos412 For the USDA guaranteed loan you still go through a mortgage lender to get the loan originated/approved/funded. I hope this helps. For the Direct loan, you go through locat USDA office. More info here: www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-direct-home-loans
once you're pre-qualified and find land, does loan include cost of getting custom layout for your home? Are you stuck with whatever cookie cutter situation your contractor offers?
It depends on the builder that you go with.
Can someone qualify for this type of loan if they are currently in a resident, but plan on purchasing land/build to have as the primary residence and sell the current one simultaneously or contingently?
You would have to qualify with both payments unless you were renting.
So do you have to have the land purchased before applying for USDA construction loan or does the USDA construction loan include the purchase of the land?
No you don't have to own the land. You can buy the land with the construction loan.
Didn’t hear what is the max DTI usda will do? Thanks
43%
What about a modular homes company? And you own your land free and clear?
I'll check to see if modular is acceptable.
So you have to have a lender to build you can’t do USDA direct?
Correct. Here is the info on the direct loan, click the overview tab to see about eligibility. www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-direct-home-loans
Can u buy a new manufacturing home or a new house that's already builded home in rural area here in Louisiana
Yes.
I have a question. I have a USDA home. I became ill about 2 years after acquiring my home. (New construction). I went on SSD and SSI. They put me in a program where they subsidied my mortgage. They lowered my mortgage and told me that I would have to pay back the subsidy. They said it was only a small percentage that I would have to pay back. My home will be paid back in 3 years and then I am responsible for the subsidy that they helped me with.
Do you know how this works? The office isn't very helpful.
You would want to find the paperwork for the subsidy that was filed and contact the entity that is listed on that recorded document to find out next step.
What about a home with a in law suite style setup, is that acceptable under a single family requirement?
Not if it's detached from the house.
If you get this loan can you use a pre manufacture shed structure as a way to spend up the building process with the continuous of doing the other build......
I'm not sure I understand your question. You're welcome to reach out to me anytime at BalanceProcess.com
@@MortgagebyAdam was asking will they let you use a pre- manufactured barn shed of A large size as a form in construction to build? Adding the other basics to compare the process. I tryin to build in Oregon...... I feel it will make the process faster
@@MortgagebyAdam thanks for responding back
@@ladyofchange2386 no, it would have to be a traditionally built home.
I currently live in a non-rural area, with a mortgage. Would I qualify for a USDA single close construction loan (if I meet the income requirements, credit, etc) if I found an eligible plot of land, while still paying my current mortgage? Obviously, I would be selling my current house and moving to the new one once its built. Or, would I have to sell my house first?
If you don't sell first, you would need to qualify with both payments included in your debt to income ratio.
What about if you put the house for rent Nd move to a new home and then in the future sell it?
I make 160k a year. Currently above the income limit for a single person in the area I want to build in. What are my options?
You can do an FHA construction loan with 3.5% down. Feel free to reach out for more info. BalanceProcess.com/contact/
Their website says "Cannot be an income-producing property". Does that mean that I can't decide to farm the land years down the road and profit from it?
It's designed for residential purposes. It all depends on intent.
Nope.
Hey Adam, does the loan cover clearing land?
If you're hiring the builder to do everything, then yes, the clearing of the land by the builder would built into the loan.
Isn't there limitations on refinancing the loan? Pre payment penalties? What about owner builder?
Can refinance after property is complete. No prepayment penalty. No owner builder.
Hello do you have any information for people living in Texas thanks
You can check eligibility in your area here: eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp
What happens if your land is already paid off how does that work because now I have equity in the land and that should cover my 20% at least that’s what I think.
Correct, the equity can be used to cover down payment
I just learned lenders wont deal with land that dont have water running through it or electricity hook up? Is that true heard this from an under writer
Not true on a construction loan.
Does this loan cover the cost of the land? Like can I find a parcel and get approved and use the money from the loan to buy the land I want to build on?
Yes, that is exactly correct.
I thought it was required to purchase your land, first, then…
It seems that USDA, along with realtors, institutions are not playing nice together!
In other words, they all need to link up to make this process easier!
@@sashaclarke2749 No, you do not have to purchase the land first.
There was a lender website on here I don't see it. Can I get that link again please?
www.rd.usda.gov/sites/default/files/RDGRH-AllStatesList.pdf
Thanks for sharing the informations, I meet all the requirements but, I have SBA Loan and grant it shows on my bank statement, does it effect on my loan eligibility? Thanks
If the loan is not in your name, it should not be counted against you on your debt to income ratio. If you're self-employed your income will be calculated based on your tax returns. Your liabilities will show on your credit report.
@@MortgagebyAdam
I really appreciate your response, I am self employed with low income and yes the SBA loan is in my name, it's less than $25k but, as I said it shows on my bank statement. I still didn't return the application, I just want to make sure that it won't return back to me. Thanks
Can you still qualify for a USDA construction loan with student loan debt? Or is it based on my monthly student loan payment not exceed more than 40% of my monthly income?
Well I thought this would be a good option until I found out that the income limits would be like $86,000 in our area
Yeah, the income limits can be an issue. A good alternative is and FHA construction loan, no income limits. Only 3.5% down payment
@@MortgagebyAdam Thank you.
I'll have to talk to a lender. In reading that it's higher for a family of 5 and that we are.
@MortgagebyAdam I was also thinking that if the limit was $86000, even if you qualified, that you could only build something fairly inexpensive with this type of income.
you couldn't build a $400,000 home.
and that would not be hard to spend on raw land that needs a well, septic, power, ect....
Everything is still up to the lender .. which sucks . How are they allowed to make there own rules within the guidelines of usda
Lenders do have overlays to reduce risk of having to buy the loan back. Any overlay you're specifically running into that is causing an issue?
@@MortgagebyAdam credit of course .. the program offers no minimum but of course the lender sets the minimum. This truly sucks
@@brittbandz9061 I hear you. Happy to connect you with a credit expert who can help you get your scores up.
Is there a list of lenders who have experienced with this loan product?
I have a lender that does them. Feel free to contact me anytime here: BalanceProcess.com/contact
Can investors or general contractor /builders utilize the USDA program ?
It's for individuals
Adam I don't have the 20% to put down but I do have a job that pays me 60000 a year and I am trying to build a sustainable Tiny home in GA. I need a construction load but I can't afford that 20% down. Will I qualify for the USDA loan?
Tiny homes aren't eligible on this product. I just sent you an email as well.
@@MortgagebyAdam Thank you for the info
So is a usda loan better than a conventional for construction???
Its better with regard to being able to do zero down payment (usda) vs 20% down payment (conventional)
All the research I've done talks only about "maximum" income limits. What about "minimum" income limits?
The income needs to more than double of whatever the liabilities are. Typically need a 43% debt to income ratio.
Thank you so much for the data, I am a Contractor in the State of Arizona, I welcome everyone in Arizona to contact me. Raye Construction
Absolutely. People in AZ reach out! Raye, what's the best number people can reach you at?
Is it true that the home cannot exceed 2000sq ft?
No
I live in Florida, Got approved with usda direct loan and I will like to build my house, I’m not sure on how to go here in Florida please advise
For a USDA direct loan, you have to go directly to USDA www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-direct-home-loans
However, one would still need to have the land to build upon first, correct?
No, you can buy the land and construction loan all in one. Step 1 is getting preapproved. Step 2 is getting builder approved. Step 3 is getting under contract on the land.
@@MortgagebyAdam this is incredible. thank you for replying, Adam.
Can you get a USDA construction loan as a self-employed business owner (1 year) with no W2?
No, you'll need to wait until you have 2 years tax returns as a business owner.
Is there a program for those on a fixed income? What is his website?
Yes, fixed income is acceptable. The link to check your income limits is in the video description.
@@MortgagebyAdam , thanks for your response. What is the direct website to your guest. He said they train you about how to apply!
You have to be sure the land has water, electricity, and perk test... Am I wrong?
You can buy the raw land as part of the process. Probably don't want to buy the land prior to getting the perk test.
@@MortgagebyAdam Thank you!
What is the process for land held in a trust for a construction loan?
The land needs to be taken out of the trust in order to close on the loan.
@@MortgagebyAdam Thank you. I guess I will have to buy a tiny house.
Only question you didnt ask was about the manufactured homes and modular
Yes, USDA allows manufactured homes.
@@MortgagebyAdam I'm asking about the construction loans bundled. Can you buy a modular home and land together?
Modular and double wide new manufactured home is acceptable.
@MortgagebyAdam when was this? I was doing research and saw that they will not help you buy land and a modular. That's why I was only looking for manufacture. I want to make sure that I'm getting accurate and up-to-date information
@@VeniFettiVici who said it wasn't allowed? I double checked, it's allowed.
Adam, I already own a home with an FHA mortgage that I have equity in, but I would like to build my dream home. Would my existing FHA loan disqualify me from the USDA lending program? I guess what I'm asking is do I have to sell my house completely before my new house breaks ground?
It depends on what your debt to income ratio is. Your lender will be able to tell you if it would work without selling.
I’m approved for one of loans but confused on what to do, so I need training on where, what or how next to do, please help
Who did you get approved with?
@@MortgagebyAdam : USDA and currently working with a Usda person but he did not explain as your podcast did, so I need a little more information or training on what, where I go from here
Could I get something like this in florida for some vacant land with 580 score. Low debt income ratio and likelye 6k down?
580 credit doesn't work on this product. 640 for best results.
I know a lender in Virginia that does 580 score....his name is Brian Riddick....look him up
Can you build a barndominium with this?🧐🤓📚
I don't believe so
will they allow owner builders loans through fda?
No
can you wholesale after rehab,
if your not happy with the home
It's not a rehab, its a ground up construction loan.
Will the USDA do a construction loan through thr DIRECT program?
I don't believe so.
Hi. How would I get in touch with Dave? Would love for him to talk to my group in FL
I would say reach out to American Financial Network, and ask to work with a FL loan officer who has done USDA Construction Loans.
Is this loan eligible for an investment property?
Primary residence only.
Does USDA discriminate on age? We'd like to build a small house. Will they make us prove we'll live another 5 or 10 years? We're 68 and 72.
No
I rather get a home built and or get a rehab loan is your loan better then 203k because I've heard terribleeeee things about 203k loan
What did you hear bad about the 203K loan?
@@MortgagebyAdam a lot of mortgage lenders dont know how to process them and or contractors drag their feet when getting the work done because the bank takes so long paying them. The loan ideal is amazing but they need to restructure the whole process so it goes smoothly for all parties
@@redciroc1211 Agreed, there are a lot of moving parts. It is best to work with a lender and loan officer who is very experienced in rehab lending.
what is the rate for usda?
Interest rates fluctuate daily. More information here: "Single Family Housing Direct Home Loans | Rural Development" www.rd.usda.gov/programs-services/single-family-housing-programs/single-family-housing-direct-home-loans