Contract to build

[Anonymous]

With our last home we built, the contractor fronted all the cost. We qualified for a USDA loan. The contractor already owned the land. All we did was show him exactly what house we wanted and he built it. After the home was finished we then bought the home from him using the USDA loan. Is this a common thing to do? We are very interested in building a home again, but we don't have the 20% down required for a construction loan. I want to call around to contractors, but I don't want to sound crazy asking them to front all of the cost. Is this common and if so, what is it called?

[ezdriver]

That was an exception for your builder to do that. Essentially the builder built a spec home expecting to sell it to you. Most builders won't do that. If you are looking to 100% USDA financing for a new home, then plan on securing the mortgage first before securing a builder. I don't know how it works with USDA but most new home construction with small/individual builders are done with construction financing commited by the lender and then the lender converts that construction financing to a first mortgage when the buyer closes on the house.