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USDA Single Close
Construction Loans

If you live in a rural area and are considering building your own home, it’s important to consider all your financing options. Conventional financing options typically require multiple loans for new construction homes. Many people take out separate loans for the construction process (also called interim construction loans) and the mortgage. This requires multiple closings, meaning that home buyers incur additional closing costs.


However, those living in rural areas have an additional option when it comes to construction loans. There is an alternative option available from the United States Department of Agriculture (USDA). The USDA is responsible for rural economic development and one of the tools they provide is the USDA Single Close Construction Loan. This can save you time and money, so read below to learn more!

What Is a USDA Single Close Construction Loan?

In an effort to increase economic development in rural areas, the USDA created a One-Time Close (OTC) Loan. Borrowers often choose the USDA OTC Loan because it allows the borrower to take out a single loan that is going to cover financing for the lot, and the construction of the home. Some of the benefits of this loan are that it requires no money down, has a competitive interest rate, and requires only one closing. For this reason, the USDA Single Close Construction Loan is a popular option for construction projects.

How Does a USDA Single Close Construction Loan Work? 

house-construction-loanA USDA Single Close Construction loan simplifies the financing process by combining two loans into one. Unlike Single Close Construction loans, traditional construction loans require borrowers to take out separate loans for construction and the financing. This process tends to drive up closing costs due to separate closing costs and increase timelines for the entire process.


A USDA OTC Loan includes all of the financing in a single closing. With a one loan closing package, a single promissory note, and one deed, this is ideal for people looking to build a construction project in rural areas.

What are the Loan Qualifications for a USDA Single-Close Construction Loan?

For someone to be eligible for a US Department of Agriculture (USDA) loan, they must meet the following criteria:


  • The borrower needs to live (or be building a home) in an eligible rural area as designated by the regulatory agency
  • The mortgage is a 30-year fixed mortgage term
  • Borrowers need to have a 640 minimum FICO score
  • The USDA must approve any contractors that are used
  • Contractors must have appropriate liability insurance, have an active license, and have at least two years of experience constructing family homes

Of note, the maximum amount allowed under this loan will vary based on income levels; however, these eligibility requirements are standard.

What Are the Benefits of a USDA One-Time Close Loan?

There are a few benefits that people should note regarding a USDA OTC Loan. Some of the key benefits are:


  • This loan only requires one closing, which means that people only have to pay the closing costs once
  • This loan does not require any money down as it has a 100 percent loan-to-value (LTV) ratio
  • Payments do not have to be made during the construction process
  • This loan has been tailored for individuals who live in a rural area
  • There is no re-qualifying process following the conclusion of the construction phase
  • Individuals interested in a USDA loan will be able to work with a reliable team of professionals from start to finish

These are some of the key benefits of a USDA OTC loan. For those who live in rural areas, this is a great way to finance a new construction project.

What Are the Alternatives to a USDA OTC Loan?

A USDA OTC Loan is only one of the many options for those who are interested in building their own home. Some of the other options people might want to consider include:


  • A VA One-Time Close (OTC) loan has been tailored for veterans and individuals on active duty with the military who would like to build a new home
  • Borrowers may choose the Fannie Mae Home Ready Program because it has been designed for people with low-to-moderate-income levels
  • An FHA loan can be helpful people who might not live in a rural area yet still want to build their own home
  • There is an option out there for almost anyone!

What Are the Steps Involved in Applying for a USDA Single-Close Construction Loan? 

If you would like to apply for a USDA Single Close loan, you need to complete a few important steps. The most ley steps in this process include:


  • You need to contact a USDA OTC Loan lender to complete the pre-approval process
  • Once this is finished, the lender will conduct an income and eligibility review, including a credit check, to determine your ability to repay the loan
  • Try to ensure that any inaccuracies on the credit report are cleared up before the credit check is done
  • The USDA will need to make sure that you are living in a rural area that is consistent with the intent of the loan program
  • You should be prepared to show that your contractor meets the eligibility requirements of the USDA program

As soon as all of this is done, the agency will contact you to let you know that you are ready to go. If this sounds daunting to you, don’t worry. There is a trained team of professionals who is willing to lend a helping hand to make sure that your project proceeds smoothly.

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Finding a USDA OTC Loan Lender – the GO Mortgage Advantage

If you are looking for a USDA OTC Loan lender, connect with a trained and friendly, mortgage professional at GO Mortgage. At GO Mortgage, our goal is to provide comprehensive services as we walk you through the process of applying for this loan from beginning to end. With construction mortgage experts on your side, you’ll be sure to have a smooth process and love your home! We are licensed in 35 states including a team specifically for Minnesota loans. Contact us today to learn more about our services!