Construction-to-Permanent Financing

As of June 2008, a home buyer cannot use a USDA loan to construct a home.

The loan is only for homes that have been built.

When a builder does arrange the financing of the land and the construction, home buyers can use the USDA loan to purchase the property when the construction is complete.

In some cases, the home buyer may prefer to get a loan to finance the land and construction, or it may be necessary when the builder is not in a position to provide the financing.


To help, the participating USDA lender can underwrite a loan based on proposed construction and issue a mortgage commitment to help the home buyer secure the interim construction loan, usually from a bank or credit union.

When the construction is complete, the USDA lender can issue the permanent “take-out” loan to pay off the construction loan.

The USDA is an excellent take-out loan because, unlike most other loans, there is no seasoning requirement on the land. The lender can loan up to 102% of the appraised value (not construction costs) to cover the land, permits, fees, site development, utilities, home, landscaping, and closing costs.

Partnership with Construction Lenders

Rocky Mountain Mortgage Specialists works in partnership with other construction lenders at the request of home buyers to provide the take-out financing of the construction loan.

In those cases, we process and underwrite the permanent take-out loan based on a credit package, drawings, specifications, construction bids, and an as-built appraisal.

Prior to construction, we provide the construction lender written loan approval of the permanent take-out loan and supporting documentation.

Single-Close Construction Loans - Discontinued

A one-time close construction loan was available for a period with USDA but was discontinued in June of 2008.

This loan served as a line of credit during the construction phase and then converted to a traditional mortgage after construction through a simple modification of the promissory note.


Home buyers benefited from the single-close loan because there was only one loan approval, one set of settlement costs, and one closing. It was simpler, took less time, and cost less.

It is mentioned here because we get so many requests for this program. It is unfortunate the program could not continue.