USDA New Construction Loans do not require a Down Payment

New Construction allows you to build your dream home the way you want. Some people who want to build a home find that their biggest hurdle is the down payment requirement typically seen with New Construction mortgages. For instance, most construction programs require a 10% down payment. The USDA has a New Construction Program that has no down payment required at all.

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The USDA New Construction Program wraps the purchase of the land and the building of the home into one combined No Down Payment transaction. We find that builders love this program because they know that their buyer is using construction funds that are backed by a Cabinet Department of the Federal Government. USDA home buyers love this program because they only have one closing, which helps to reduces costs. In addition, the full approval or USDA Guarantee is issued prior to the start of construction. This let’s the buyer and builder know that the financing won’t hit a snag during the construction process.

As far as eligibility, the USDA New Construction Program has the same requirements for property location, income limits, and credit scores as the traditional USDA Mortgage Program.

Construction Costs that are Covered by the USDA Mortgage

  • construction costs, including costs to any subcontractors

  • cost to purchase the land

  • costs to pay off any loans taken out to purchase the land

  • costs of appraisals, inspections, surveys, permits, and design plans

Home Builder Requirements

  • must be licensed and insured

  • must pass a background check

  • must provide home buyer with construction warranty

Property Requirements

  • land must be located in a USDA Eligible area

  • must meet all local codes

  • for additional information, read about the USDA Property Requirements

Income Requirements

  • home buyers must meet the maximum Household Income Requirements for their County

  • for additional information, read about the USDA Income Requirements

Credit Requirements

  • credit score of at least 620 and receive Approval through the USDA’s Government Underwriting System (GUS)

  • for additional information, read about the USDA Credit Requirements

New ConstructionKeith Landis