Looking for Info Re: USDA construction loan

[Anonymous]

The broker I've been speaking to about a USDA mortgage flat out told me they don't do construction loans. The USDA site says otherwise, and I did speak to someone at the field office who referred me to an authorized builder.

Does anyone have any info, advice, etc with regard to getting a USDA construction loan? A USDA loan seems to be our only option at present. We qualify both on income and location for a guaranteed (but not direct) loan.

I've seen Chase mentioned, but also that they are more expensive than others. How do I find a good lender who does these?

[WannaHouse]

What state are you in?

In Wisconsin, our USDA site has a list of lenders. See if you have one for your state as well. If not, maybe this list will still help you. As far as construction loans, I am sure you can build a house as well.

http://www.rurdev.usda.gov/wi/programs/rhs/sfhg/million.htm

Message Edited by WannaHouse on 01-31-2009 01:31 AM

[Anonymous]

Oops - that would help, wouldn't it?

We're in Ohio.

[WannaHouse]

This is all I can find on Ohio. On the bottom, it has names of contacts. It says just above that to call to get approved lenders. Hope that helps some.

Oh, and it also says this:  

Homes That Qualify:

• Guaranteed loans can be made on either new or existing homes

http://www.rurdev.usda.gov/oh/grhhousing.htm

[Anonymous]

yeah, I haven't been able to find anything for Ohio online. I know they do it. The person I talked to this afternoon did give me a builder's name, and he was helpful. She wasn't sure about lenders and I didn't push that because I thought that the broker I was already talking to about USDA would be able to do the construction loan as well.

I did learn that there are only certain builders (and only one in our county) in part because the builder has to guarantee the cost and eat any overruns. I'm sure there are other restrictions as well.

I can find info from other regions. Some of those say no downpayment. Others say one is required for the construction loan (Chase Mtg site says 3%.) I'd really like to do it with no down payment. I have $10k, but really want to use $3k to pay off a loan at the CU would free up $188/month and keep the rest as reserves.

Guess I'll have to wait until Monday...

[ShanetheMortgageMan]

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@WannaHouse wrote:

This is all I can find on Ohio. On the bottom, it has names of contacts. It says just above that to call to get approved lenders. Hope that helps some.

Oh, and it also says this:  

Homes That Qualify:

• Guaranteed loans can be made on either new or existing homes

http://www.rurdev.usda.gov/oh/grhhousing.htm

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That means that it can be a brand new home, like you are buying a home from a builder.. doesn't mean you can build a home.   USDA can be used to build a home as well, but no lenders are offering it that I know of.  USDA's direct version offers it though without going through a lender.  The 5-second easy solution is ask "Which lenders have you guaranteed construction loans from?"  If they can't tell you, odds are no one is doing them in their area.  I've called about a dozen USDA offices throughout the US and not one USDA employee could tell me which lenders were doing construction loans, but they all followed it up that their Direct version offers them when funds are available.

[Anonymous]

That's pretty much what I found out, and explains why I was getting two opposed answers.

The field agent is more familiar with the direct loan so told me yes, while the lenders know that no one is actually doing them under the guaranteed program.

However, the builder that does the direct loan construction in our county will also build for the guaranteed loan and there are lenders that will work it out.

They give an early approval based on the appraised plans. He carries the cost of the construction including actual purchase of the lot. I'm a little surprised, because if anything should happen to prevent closing - an unexpected hike in interest rates that mean we no longer qualify (construction time is 3-4 months, can only lock in rate for 60-75 days), a credit problem that pops up right before closing, job loss, etc - then he is stuck with a house in a difficult market.

We're seriously considering it. We have three kids, 13-16 and our number one requirement ahead of all else is to stay in the school district. Right now there are only two 4 bedroom houses on the market that we could buy with the USDA mortgage and neither one is very appealing. (Unfortunately we're on the penny-pinching end of the scale here.) We custom built 12 years ago and know a lot more about the process now because of that.

[ShanetheMortgageMan]

deemac, glad you were able to find a builder like that.  Even though I don't like the idea of buying a home from a builder, and having it built from scratch, in the situation where that does occur I'd only recommend the builder holding the paper/paying the juice during construction... because of the very reasons you listed (not qualifying, rates go up, etc.).  Glad you went through the process once so you know what to expect as well.  If the builder is willing to build in anticipation you'll buy it at completion with USDA, and there are no other options available, I'd say go for the custom build.