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USDA Direct Construction > Permanent Loan, and My Experience.

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
Established Member

USDA Direct Construction > Permanent Loan, and My Experience.

I have been lurking on these boards since March of this year (2018) after starting a new job that has allowed me to have a bit of extra money to pay off bills. It has been an incredible tool in my journey.

I started monitoring my credit using Credit Karma and attempting to rebuild it so I could apply for a USDA Direct Home Loan. As of March 16 my Credit Karma scores were as follows TU 544, EQ 514. Dismal, and truly overwhelming. This reflected 6 accounts in collections ($105 from a previous rental, and $95,000 in medical debt from an emergency surgery), and no credit history.

I opened a CapitalOne Secured card immediately in attempt to build history, used it minimally and payed it off in full every month.

I payed off the small $105 collection and that in itself raised my TU score 40 points!

As of today my Credit Karma scores are as follows TU 678, EQ 578 (this number hasn't updated since Aug 17th).

I also signed up for myFICO to check my mortgage scores, they haven't updated since 9/4 so I expect these to change quite a bit.

TU 667, EQ 628, EX 660.

I finally applied for financial assistance for my medical debt through the hospital. I called this morning to check on my application and found out that 100% of my $95,000 debt was going to be covered. I AM OFFICIALLY DEBT FREE. So I am unsure of how this will affect my scores, but I can only imagine it will be positive.

So here I am, almost ready to turn in my application with the USDA.

But I can't for the life of me find any information, or really, testimonial experiences of anyone who has BUILT a house using a USDA loan. My new job is with a construction company, and if I am able to qualify for my area loan limit my boss is able and willing to build me a modest home on a lot.

There is plenty of jibberish online about it, but I am really looking for first hand experience. Specifically for a construction to permanent loan.

I have a couple properties in mind that have been on the market for a long time. I obviously need to wait until I receive a certificate of eligibility to move forward with anything. But in order to purchase a piece of land with loan monies do I already need to have the house plans/building estimate ready? Or am I able to first purchase a lot, take some time to procure plans/project manual/estimate, then continue the construction loan?

10/11 **UPDATE**

I still haven't received any new information on the construction process, but was told by the Administrative Assistant at the local USDA office that after my approval my LO at the USDA will have the answers to my questions so I guess that means I need to wait.

I did have all of my previously mentioned medical debts deleted from EQ (they were only reported to one bureau), and now my scores are as follows... TU 665, EQ 672, EX 658. Both my TU, and EX lowered a few points because of my credit card utilization last month, but that should change again with my next scores.

I also decided to write a goodwill letter after reading a few threads here on myFICO to see if I could get the small collection that I had recently paid off. After my pre-qual application, the USDA told me I had to have it paid off for at least 6 months before applying, meaning I wouldn't be able to apply until FEBRUARY 2019. I called the collection company to acquire my account number and a correct address to send it to and my account representative so generously said I wouldn't need to send a letter and that she would have it deleted. How amazing is that?!

So as soon as I see it has been deleted from my credit report I am applying. I am assuming mid-next month! I will keep this post updated. Smiley Happy

Thanks again to all the contributors that have helped me get to this point. This website definitely cultivates hope, and I appreciate its existence.

11/15 **UPDATE**

Yesterday I received a FICO update that my TransUnion FICO 8 score had jumped 53 points with the deletion of my last collection account. I waited to use myFICO subscription credit report update until I had a flag that one of the bureaus had updated and pulled all three this morning.
All three bureaus updated and my new Mortgage scores are TU 686, EQ 685, EX 674. I am ready to apply! I’ll be sending my application in on Monday Smiley Happy

11/19 **UPDATE**

Emailed my application to USDA, and mailed my application fee.

A few items of concern;
My local office is extremely short staffed, so much so that their physical office is closed until 12/3. So weird. Their administrator has been very helpful and prompt with email responses though which has been super helpful.

I asked about current funding, and she mentioned they are fully funded until December 7th, which is when their funding year ends. Yikes. She mentioned they typically are refunded quickly, but that isn’t guaranteed.


So it’s out in the universe now!

 

11/26 **UPDATE**

 

My credit report was pulled today, I was alerted around 12 PM from every credit monitoring site EXCEPT for myFICO... go figure. I then received an email at about 4 PM from my USDA rep with an attached letter stating after reviewing my credit that my application has been accepted to process and that they needed two alternative credit statements for 12 months. I will be sending my power bill and car insurance statements and emailing them in the AM.

 

They have been surprisingly responsive. I am hopeful Smiley Happy 

 

12/5 **UPDATE**

 

After waiting on the return of my Landlord Verification Requests from my current and previous landlords my local USDA representative emailed me to let me know that they were received on Monday (12/3) and that she sent my full completed application to the underwriter in Olympia (WA) the same day.

 

I had asked her how long from this point it typically takes and she responded that it can take 90 - 120 days of processing to approval once sent to Olympia. So although this has seemed like a fairly quick process locally, it will be a while before I hear anything back from the state level. I guess I will just have to sit back and try to enjoy the holiday season! 

 

12/12 **UPDATE**

 

Today I received a letter in the mail from my Loan Specialist in Olympia citing that she had received my application and was assigned to my application. The letter explained that she will be periodically contacting me for more information, and it gave me her contact info in case I have any questions. Boy do I. All the information I had previously sent to my local USDA office must have been barely the tip of the iceberg in the grand scheme of this process. More to come soon I am sure. 

 

1/3 **UPDATE**

 

Insert Government Shutdown. Smiley Sad

 

2/22 **UPDATE** It has been 95 days since I turned my application in to my local USDA office. Still no approval, and no progress on my application. After reaching out to my loan specialist last week, she let me know my credit report expires on 2/26 and it will need to be re-run after that. I emailed my rep this morning hoping for an update of where my application is in line in being processed. 

 

3/1 **UPDATE** I reached out to my loan specialist last week asking for the status of my application since my credit report was about to expire. She said that she had finished underwriting my loan and that it was sent to her Director for approval. (I am hoping this means I was approved and it is just waiting on the final OK!) After another week had passed I emailed the Director and although her response was less than helpful it was prompt. It essentially said there are many applications on her desk before mine and she just hasn't made it to mine yet and to check in again next week. 

 

From reading posts from previous posters I expected an interview of some sort before being approved, but I was told that was not happening. I feel like I am very close to receiving my Certificate of Eligibility, and that is truly just the beginning of the process. Day 102.

 

3/11 **UPDATE** My Certificate of Eligibility is in hand! My loan officer email me all the documents including first time home buyers class information, the orientation packet, and my COE. I qualified for my area loan limit with a 3.5% interest rate. Now let the home buying begin!

 

5/22 **UPDATE** After two months, one extension, and a lot of failed attempts, I am finally under contract on a house! I probably had put in a half dozen offers on other properties, and have been denied so many times. At this point my rep is looking over my contract and will have my loan estimate to me within three days. She said after that I can schedule an inspection and an escrow account. After the inspection if all is well she will order the appraisel. Hoping to close by mid July fingers crossed! 184 days into this process. 

1/28/19 FICO 8: EQ664 - TU649 - EX661
1/28/19 FICO 5/4/2: EQ690 - TU686 - EX678
11/16/18 FICO 8: EQ662 - TU644 - EX656
11/16/18 FICO 5/4/2: EQ685 - TU686 - EX674
10/22/18 FICO 8: EQ602 - TU589 - EX617
10/13/18 FICO 5/4/2: EQ672 - TU665 - EX658
CapOne Plantinum $550
10/2017 Started Rebuild
39 REPLIES 39
Established Contributor

Re: USDA Direct Construction > Permanent Loan

I have no idea myself, but I also applied for USDA Direct. There are very few new construction homes in my areas of interest that I can afford and those are built too closely together for me. Have you found an experienced realtor in your area ?

 

Kudos to you for improving your credit so quickly. I'll be following your progress.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 2 of 40
Frequent Contributor

Re: USDA Direct Construction > Permanent Loan

For government insured loans i.e. FHA, VA, and USDA RDL, we lenders don't call these construction to permanent loans. What you are looking for what is referred to a "One Time Close". I've done several over the years, and like any construction loan, they are complicated and have a lot of moving parts so make sure you find someone who is experienced in closing them.

 

Best wishes to you

Mortgage Banker - Since 1988 offering FHA, VA, USDA, Conventional, Jumbo and Portfolio Loan Products. Licensed in AL, AZ, CA, FL, GA, IL, IA, IN, KY, LA, MI, MO, NC, NE, NV, NJ, OH, OK, OR, PA, SC, TN, TX, VA and WI.
Message 3 of 40
Established Member

Re: USDA Direct Construction > Permanent Loan

Thanks for the information, I appreciate the time you took to answer! The USDA Direct verbage in their manual was Construction to Permanent Loan. I am not applying for the USDA Guarunteed Loan (that goes through a Mortgage Broker backed by the USDA), but the USDA Direct loan that is administered directly through my local USDA office. It’s all laid out pretty well in the USDA Direct manual, but unclear in some aspects. My USDA local office wont really answer my “what if” questions until I actually apply. Just hoping someone out there has muscled through the lengthy process and made it to the other side!
1/28/19 FICO 8: EQ664 - TU649 - EX661
1/28/19 FICO 5/4/2: EQ690 - TU686 - EX678
11/16/18 FICO 8: EQ662 - TU644 - EX656
11/16/18 FICO 5/4/2: EQ685 - TU686 - EX674
10/22/18 FICO 8: EQ602 - TU589 - EX617
10/13/18 FICO 5/4/2: EQ672 - TU665 - EX658
CapOne Plantinum $550
10/2017 Started Rebuild
Message 4 of 40
Established Member

Re: USDA Direct Construction > Permanent Loan

I wrote an update! Smiley Happy 

1/28/19 FICO 8: EQ664 - TU649 - EX661
1/28/19 FICO 5/4/2: EQ690 - TU686 - EX678
11/16/18 FICO 8: EQ662 - TU644 - EX656
11/16/18 FICO 5/4/2: EQ685 - TU686 - EX674
10/22/18 FICO 8: EQ602 - TU589 - EX617
10/13/18 FICO 5/4/2: EQ672 - TU665 - EX658
CapOne Plantinum $550
10/2017 Started Rebuild
Message 5 of 40
Established Contributor

Re: USDA Direct Construction > Permanent Loan

Congrats on your credit successes ! I sent my app in the beginning of September and was told several weeks later my income was too low. i contacted a certified loan processor and he is currently working on it for me. So if you run into any bumps with the USDA Rep, I would not give up and have someone else who's had training to help you.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 6 of 40
Member

Re: USDA Direct Construction > Permanent Loan, and My Experience.

I did new construction with a usda direct loan and It's been one of the most stresful experiences for me. My loan officer didn't do construction to new loan. I don't know if it was becasue my builder built home with their own funds and didn't need to draw from my loan or what. I sent pre qualification letter in 04/12/18. It had been 3wks no response so I called 5/4/18 and he went ahead pulled and reviewed and called me back said I could come get the full application. Went same day and picked up. Turned full application in on 5/10/18 credit ran from one source 5/16/18. I got a call from LO 5/24/18 with some questions and got a email about an hour later with COE package. 6/14/18 meet with builder and signed contract and she sent everything to my loan officer. I emailed loan officer 6/21/18 and got response back she received contract and would order appraisal. 7/09/18 my contractor told me they had heard from appraiser and he was suppose to start that day. Got email from USDA loan officer 7/11/18 appraisal was approved and said next step is to let her know when house is 100% complete and she will have to order another appraisal. Then I got  a Loan estimate package 7/23/18 from loan officer. So sat back waited for house to be completed. Now here comes the stressful part, I email loan officer 10/4/18 house completed and got email back the next day due to no funds avaiable can't order appraisal. I was so upset. I emailed builder and they have being working with the usda for years building houses and she was floored. Usually she said for new construction it's handled in the county it's being built and for whatever reason mine got sent out to a county no where near me and our locla office didn't order a 2nd appraisal somone from office would come out and check property. Well the loan officer i got doesn't do it that way. Long story short builder was calling and trying her best to get an understanding of what was going on and come to find out my loan officer never obligated the funds @ 1st appraisal and should have ( they where avail at that time as well.) . 10/19/18 loan officer sent me orientation video to watch and I had a phone confernce with her 10/24/18 o discuss video and loan. She try to play off her mistake and said she had obliggated funds for house and was waiting on appraisal funds but all the sudden she said let me check my email and I just got email saying I can order appraisal. So same day she ordered appraisial and I had to send 2 month bank statements and month of pay stubs. I called builder to let her know ans she said she figured becasue she had heard funding came back avail.. 10/26/18 I went and paid for the year of homeowners insurance and sent her the binder and she sent me warranty and funding commitment agreement to sign, sent back same day. So now we're waiting on appraisal to come back they have 10 bus days to get back and then she can submit file for closing and will pull another credit report due to it being over it was either 90/120 days. My middle credit score they pulled during 1st tri merge report was 654 and I can tell you credit karma can be way off from what they see when they pull.

 

***UPDATE*** Another mess up on the USDA. So appraiser came out to do completion appraisal and I get a call from loan officer say that because the room over the garage we had finished that becasue the steps to go up to it are not inclosed into the house. You go up garage step and then on right you open door to go up steps to upstairs if you keep walking straight instead of going up to room above garage you come to the door to come into house. Now my 1st apprasial had this floor plan showing this and appraiser approved it and then when sent to USDA they approved it but now loan officer said, I don't know how it was missed all I can say is sorry!!!! And this has to be fixed before they can omplete appraisal if not the appraisal amount will go down becasue they can't included as heated space (even though it has it's own heating /cooling unit keep in mind. So the house would not appraise for amount it orignally did. I just can't believe this mess. So the builder is going to move door to the front of the steps so that the entracne to go upstairs is in house not outside door. Also in case anyone wanted to know I make a little over 35k a year and have a family of 4 and my income is the only household income. The only debt I have is 5 credit cards with 3 having a  0 balance and I keep overall usuage % at 30 if I do use and I have a personal loan I pay 132 a month on. I was approved for max amount in my area which is 235,612. I had 4 colllections  2 where 3 yrs old and 2 small ones that I had no clue about where 5months at the time total combined was around 1200.00 all medical bills and they didn't ask me to do anything with those. I went ahead and wrote my explanation letter when I turned in application. So we'll see what happens from here. I told the builder I feel like at this point they're picking on me for some reason. I'll update. I know there is not alot of information out there about full experience and hopefully this will help someone know what questions to ask during process.

Message 7 of 40
Established Contributor

Re: USDA Direct Construction > Permanent Loan, and My Experience.

@mbandh - wow, thanks for all the details on your process so far. I'm hoping you get cleared to close soon. Sorry your rep dropped the ball. It must have been crushing to go under contract, have your home built and then find out no funds are available. 

 

You got your COE super fast ! I'm hoping for the same. What state are you in ?

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 8 of 40
Member

Re: USDA Direct Construction > Permanent Loan, and My Experience.

Hi, I’m in NC. It was very devastating to have a house ready to move into and I had done everything she had asked me to do and she dropped the ball and having no clue when funding would come available again. Builder emailed me today and said the appraiser contacted her and they're coming out today. Fingers crossed closing will be sooner than 11/30

 

 

Message 9 of 40
Established Contributor

Re: USDA Direct Construction > Permanent Loan, and My Experience.

Fingers crossed ! I hope you come back and post when you close !

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 10 of 40