USDA One-Time-Close/OTC Construction Loans. 0% Down, 6% Seller Closing Credit Allowed

USDA Construction Loan Loans Program Guidelines

Loan Purpose

• Finance Construction Costs
• Purchase a lot
• Land can be currently owned, including:
  • Recently purchased
  • Owned Free and Clear
  • With a current mortgage

Credit Profile

• 620 minimum middle credit score for all borrowers on the loan
  • 620-659: A minimum of 2 qualifying credit scores are required
  • 660+: A minimum of 1 qualifying credit score
• No foreclosure or short sale within three years of contract ratification date
• No Chapter 7 bankruptcy discharge within two year of contract ratification date

Construction Timeframe

• Construction timeframe is based on the construction type, with a maximum of:
  • 150 days for a manufactured home
  • 180 days for a modular home
  • 270 days for a stick-built home
• Construction can start immediately after closing

Draw Option

• This option requires a “Project Review” by the Underwriter/Lender
• At closing the land seller or if financed, the land will be paid off/funded
• The maximum number of draws are based on the house type, with:
  • Manufactured/Modular Home Retailers allowed up to three draws
  • Site-Built Home Builders allowed up to five draws
• For Manufactured/Modular homes, provided the house has been built, the factor invoice is in place, acceptable property coverage is in place, the Retailer may request that the factory or floor-plan source can be paid the invoice cost of the home. This doesn’t count against the Retailers three draws
• Draw amount will be based on inspections and percentage of completion
• Maximum amount that can be paid out prior to the final draw being issued is 80% of the Builders/Retailer’s Contract Price
• Final draw is paid after the Certificate of Completion or Occupancy is issued

No Draw Option

• Streamlined process where the Builder/Retailer has agreed to no interim construction draws through out the process and will receive all funds at the time the home is completed
• At closing the land seller or if financed, the land will be paid off/funded
• Saves time since there are no 3rd parties involved in performing a Project Review
• Builder/Retailer pays a lesser Administration Fee

OTC Administrative Fees and Construction Interest

• The Administrative and Interest cost of a One-Time-Close loan is based on the type of the home, amount financed, and whether the Builder/Retailer request to be paid via a draw. See below chart for an estimated break-down of the One-Time Close Administration Fee:

  	Builder Financed Amount 1 2	Manufactured Home (Max 150 Days 3)	Modular Home (Max 180 Days 3)	Site-Built Home (Max 270 Days 3)
  No Draw Option	No Interim Construction Draws	$2,500	$4,300	$5,100
  Draw Options	Up to $100,000	$6,700	$6,800	$8,000
  	Up to $125,000	$7,800	$8,100	$9,400
  	Up to $150,000	$9,000	$9,300	$10,800
  	Up to $175,000	$10,200	$10,500	$12,300
  	Up to $200,000	$11,400	$11,700	$13,700
  	Up to $225,000	$12,600	$13,000	$15,100
  	Up to $250,000	$13,800	$14,200	$16,600
  	Up to $275,000	$15,000	$15,400	$18,000
  	Up to $300,000	$16,100	$16,600	$19,400
  	Each Additional $25,000	$1,200	$1,200	$1,400

  ¹ Builder Financed Amount is the amount the Builder/Retailer borrowers from the lender during construction, including any contribution to land costs, closing costs, and prepaids. This amount can’t exceed the final contract price for the home and improvements.

  ² Financed land cost more than 20% of the loan amount may require an additional fee. Please call for more information.

  ³ If construction if not completed by the agreed upon date, a fee equal to 10% of the One Time Close Administration Fee will be charged to extend the construction period for each 30-day period up to a maximum of one year.

• The Administration Fee is inclusive of the following:
  • Construction Administration Fee
  • Construction Underwriting Fee
  • Construction Closing Coordination Fee
  • Interim Construction Interest
  • Inspection Fee
  • Draw Fee
  • Title Updates
  • Modification and Agreement and Recordation
  • Note: The Administration Fee is charged directly to the Builder/Retailer (not the borrower) and therefore will not appear on the Loan Estimate

Builder/Retailer Responsibility

• The builder/Retailer must act as the only General Contractor ("GC") on the project
• GC can’t be related to the borrower(s) or an employee/employer of the borrower
• GC must be insured, licensed, and bonded
• USDA requires the Lender to pull a commercial credit report on the business, a personal credit report and criminal background check on the owners

Loan Amount

• No maximum loan amounts. Loan amount dictated by USDA Guaranteed Underwriting System approval

Commitment Fee/Monthly Annual Fee

• USDA charges a 1% Commitment Fee
• Commitment Fee can be financed into the loan
• Example:
  • Purchase price - $100,000
  • Base Loan amount - $100,000
  • Commitment Fee - $1,010 ($100,000 [purchase price] /.99 - 100,000)
  • Maximum financed loan amount = $101,010
  • USDA requires a monthly Annual Fee (i.e. mortgage insurance premium) with an annual factorial of .35%

Ratios

• 33.99/45.99% (DTI) with GUS Accept/Eligible underwriting findings

Property Type

• House must be built in an eligible USDA Rural Development Location
• One-unit properties only
• Stick Built Housing
• Modular Homes
• Manufactured Housing – Multi-wide only (no single wide permitted)
• Ineligible property types include: condominiums, multiple homes on one lot, unique properties including log homes, tiny homes, etc.

Occupancy

• Owner occupied only
• All borrowers on the loan must have ownership in and occupy the property
• No co-signers permitted

Documentation

• All loans must be fully documented per Agency Guidelines
• For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)
• Most recent two-year tax returns will be obtained directly from the IRS, even if employed as a W-2 employee

Down Payment/Closing Costs

• 0% down payment required
• Builder/Retailer contribution toward buyers closing costs and escrows up to 6% of the construction costs
• The Seller of the land contribution toward buyers closing costs and escrows up to 6% of the cost of the land

Terms

• Amortization period: 30-year fixed rate
• Borrowers are qualified on a 29 year amortization period for a 30 year mortgage