A Comprehensive List of USDA Construction Loan Lenders

In theory, it’s a great idea: A USDA construction loan, with no money down, to finance your new home build.

In practice, it’s hard to make this kind of financing work. For one thing, there aren’t many USDA construction loan lenders.

And, once you’ve found a lender, it’s hard to find a building contractor who has the USDA’s approval.

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List of USDA construction loan lenders

Here’s a list of active USDA construction loan lenders for 2023, as reported by USDA’s website.

Is it hard to get a USDA construction loan?

It can be quite hard to get a USDA construction loan. Compared to USDA loans for existing homes, only a few lenders offer USDA construction mortgage loans.

But a bigger hangup is finding a USDA-approved building contractor.

Borrowers who have already chosen a builder often learn the USDA hasn’t approved their builder and won’t move forward with the loan. And many builders — especially good ones who have plenty of work — don’t have time to go through the process of getting USDA approved.

That’s why a lot of people who try to get a USDA construction loan eventually abandon the idea.

Instead, they’ll find an existing home that qualifies for a USDA loan with no money down. These loans are much easier to find. Most lenders offer them.

People who still want to build their own home instead of buying an existing home can usually find other types of construction loans if they can’t make a USDA construction loan work.

USDA construction loan requirements

At first glance, USDA construction loans have many of the same requirements as USDA loans for existing homes:

• The borrower must qualify: Usually, this means having a credit score of around 640 and a debt-to-income ratio of 41% or lower. Also, USDA borrowers must meet income limits, meaning they can’t earn more than 115% of their area’s median income for their household size
• The area must qualify: The USDA insures loans only in USDA-designated rural areas, but the USDA’s definition of rural is more inclusive than you might think. Most U.S. ZIP codes qualify

But USDA construction loans have their own, more specific, requirements, too:

• The contractor must qualify: To be USDA-approved, the building contractor must have at least two years of experience building single-family residences. The contractor also has to carry at least $500,000 in liability insurance and have a satisfactory credit rating. The USDA will run a background check on the contractor; a builder who has previous felonies, for example, won’t qualify
• The building plans must qualify: The building plan must align with the USDA’s property requirements. The project must also meet or exceed the International Energy Conservation Code. The builder must be willing to provide a construction warranty that lasts at least one year

If you can find a USDA construction loan lender, your loan officer may know some building contractors in the area who meet the USDA’s standards. An experienced lender, paired with a builder who knows about USDA loan-financed building projects, can make this process more seamless for you.

USDA construction loan process

If you’re thinking about using a USDA construction loan, here’s a step-by-step guide:

• Step 1 — Find the right lender: The USDA construction loan journey should begin by finding a lender to partner with throughout the process. See the list above to find USDA construction loan lenders near you. Try to compare offers, if possible, since different lenders will quote different rates
• Step 2 — Find a building contractor: You could start contacting local building contractors to see if they’re USDA-approved, but it may be easier to ask your USDA-experienced lender for suggestions
• Step 3 — Close the loan: The lender will examine the loan and approve it if it meets requirements.
• Step 4 — Start construction: Construction will start within 30 days of closing the loan. Your lender will work with the builder to issue funds as needed.
• Step 3 — Complete the project: With a lender and contractor on board, you have the building blocks for success. Trust these experts, but also be sure to ask questions throughout the process, from drafting plans to digging footings to painting the walls. After all, it’s your new home
• Step 4 — Close on the loan: As construction begins, your lender will allow the builder to draw funds to pay for construction costs and keep the project moving forward. When the house is finished and inspected, your USDA construction lender will schedule a loan closing. If the project cost less than expected, the extra money will be applied to your loan’s principal
• Step 5 — Move in and make payments: With the loan closed, it’s your home. You can move in (and start making payments)

Steps 1 and 2 in this process make all the difference. They can lay a strong foundation for the entire project.