Does USDA offer a construction loan?

Yes. USDA's Single Family Housing Guaranteed Loan Program includes a single-close construction-to-permanent option that finances the lot and the build with one closing and up to 100% financing. It is not a separate program — the same eligible-rural-area and household income-limit rules apply, and the structure is governed by HB-1-3555 Chapter 12.

Do I need a down payment for a USDA construction loan?

No. The USDA single-close construction-to-permanent loan allows zero down payment and offers up to 100% financing for eligible borrowers. The loan carries a financeable 1.0% upfront guarantee fee and a 0.35% annual fee. USDA's January 2026 training says a construction contingency reserve is optional; if used, it is capped at 10% of construction cost.

Does household income still have to be within the USDA limit to build?

Yes. A construction loan does not waive the income test. Adjusted annual household income must be within the Guaranteed Loan limit for the lot's county and the household size — under the FY 2026 table (effective July 13, 2026) the moderate-income floor is $122,800 for one-to-four-person households and $162,100 for five-to-eight-person households in most counties, with higher-cost counties higher.

When does the USDA guarantee take effect on a construction loan?

With the single-close structure, USDA's loan note guarantee may be issued at closing, before construction begins. The securitized option needs no completion-stage loan modification; the standard interest-only option may be re-amortized through a modification after completion. USDA's January 2026 training says a higher modified PITI payment alone does not require re-underwriting, but USDA and the participating lender still make the final eligibility determination.

How are payments handled during a USDA construction loan?

USDA permits a standard option with interest-only payments during construction and a securitized option with full PITI payments during construction. Either can use loan funds to establish up to 12 months of payment reserves. The standard option may need a completion-stage loan modification and re-amortization; the securitized option does not.

Can I be my own builder with a USDA construction loan?

No. USDA's January 2026 single-close training says contractors building their own residence are ineligible. The participating lender must verify the builder's single-family construction experience, required state or local license, and at least $500,000 in commercial general liability insurance.

Scenario template

USDA construction loan: single-close construction-to-permanent

How the USDA single-close construction-to-permanent loan finances land and the build with one closing, and why it still runs the same rural-area and income-limit gates.

Last verified 2026-07-22

Source review by Rural Home Check; last reviewed 2026-07-22

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Short answer

The USDA construction loan is the Single Family Housing Guaranteed Loan Program's single-close construction-to-permanent (CTP) option: one closing combines the interim construction loan and the permanent mortgage, with up to 100% financing. It still requires an eligible rural building site and household income within the Guaranteed Loan limit.

How to use this page

Use this when you plan to build on a rural lot rather than buy an existing home and need to see whether a USDA single-close construction loan fits before contacting a participating lender.

Deep dive

A USDA construction loan is not a separate program; it is the single-close construction-to-permanent (CTP) feature of USDA's Single Family Housing Guaranteed Loan Program. Searches for a 'USDA construction loan map' usually mean: can I build on a rural lot with USDA financing, and is the lot eligible? One closing combines the interim construction loan with the permanent mortgage, so the borrower signs once and avoids a second set of closing costs — USDA treats the transaction as a purchase. The build still has to clear the same two gates as any USDA loan: the lot must sit in an eligible rural area on USDA's map, and adjusted annual household income must fall within the Guaranteed Loan limit for that county and household size. Under the FY 2026 USDA income-limit table (effective July 13, 2026), that moderate-income floor is $122,800 for households of one to four people and $162,100 for households of five to eight people in most counties, with higher-cost counties exceeding those figures.

What a USDA single-close construction loan is

USDA's single-close construction-to-permanent loan combines the interim construction loan and the long-term mortgage into one closing. Because there is only one closing — which can save considerable closing costs — the Agency treats the loan as a purchase transaction. USDA Rural Development guarantees up to 100% financing, so an eligible borrower can finance the lot and the build with no down payment, and the loan note guarantee may be issued once the interim construction loan closes, without waiting for the home to be completed. The single-close structure is governed by HB-1-3555 Chapter 12.

How the USDA construction loan runs the same two eligibility gates

A construction loan does not relax USDA's eligibility tests. Gate one is location: the lot you intend to build on must fall outside USDA Rural Development's ineligible-area polygons, the same map an existing-home address is checked against. Gate two is income: the program is means-tested for households at or below 115% of the area median income, so adjusted annual household income must land at or below the county and household-size row in USDA's HB-1-3555 Appendix 5 income-limit table. Run the lot address through the property check and the household through the income screen before committing to plans — an ineligible lot or an over-limit household stops a construction loan exactly as it stops a purchase loan.

Down payment, fees, and the contingency reserve

USDA single-close construction loans allow zero down payment and finance the build with the same fee structure as a standard Guaranteed Loan: a financeable 1.0% upfront guarantee fee and a 0.35% annual fee built into the payment. USDA's January 2026 training says a contingency reserve is optional, not a universal 2% minimum; when used, it can cover eligible unplanned construction costs or change orders and is capped at 10% of construction cost, including labor, materials, and soft costs. The reserve is deposited into the construction reserve account, and any change order still needs lender approval. This precheck does not estimate build costs, lot prices, or rates — those come from your contractor and lender.

USDA construction loan payments during the build

USDA's January 2026 single-close training describes two payment structures. Under the standard option, interest-only payments are made during construction and the remaining balance may be re-amortized through a loan modification after completion. Under the securitized option, full principal, interest, taxes, and insurance (PITI) payments are made during construction and no completion-stage loan modification is needed. Either option may establish a payment reserve from loan funds for up to 12 months. The construction-period rate must be fixed at closing, although the permanent rate may be reduced when a standard loan is modified.

Choosing a lender and contractor for the build

Not every USDA-approved lender offers the single-close product. A lender self-certifies that its staff has at least two years of construction-loan experience or uses a construction-loan management company with that experience, and USDA publishes a current participating-lenders list for the construction-to-permanent program. The lender must document that the builder has at least two years of single-family construction experience, any license required by state or local law, and at least $500,000 in commercial general liability insurance. Owner-builders are not eligible. USDA does not maintain or recommend a contractor list, so identifying a qualified builder is the applicant's responsibility, often with help from a real estate or lending agent. Take the lot and income precheck results to a participating single-close lender, who confirms the official USDA determination and underwrites the build.

Common questions

USDA construction loan — answers to the questions builders and buyers ask

Does USDA offer a construction loan?: Yes. USDA's Single Family Housing Guaranteed Loan Program includes a single-close construction-to-permanent option that finances the lot and the build with one closing and up to 100% financing. It is not a separate program — the same eligible-rural-area and household income-limit rules apply, and the structure is governed by HB-1-3555 Chapter 12.
Is there a USDA construction loan map?: There is no separate construction map. A USDA construction loan uses the same property eligibility map as any USDA loan: the building lot must sit outside USDA Rural Development's ineligible-area polygons. Check the lot address against the eligible-area map first, then screen household income against the Guaranteed Loan limit before planning the build.
Do I need a down payment for a USDA construction loan?: No. The USDA single-close construction-to-permanent loan allows zero down payment and offers up to 100% financing for eligible borrowers. The loan carries a financeable 1.0% upfront guarantee fee and a 0.35% annual fee. USDA's January 2026 training says a construction contingency reserve is optional; if used, it is capped at 10% of construction cost.
Does household income still have to be within the USDA limit to build?: Yes. A construction loan does not waive the income test. Adjusted annual household income must be within the Guaranteed Loan limit for the lot's county and the household size — under the FY 2026 table (effective July 13, 2026) the moderate-income floor is $122,800 for one-to-four-person households and $162,100 for five-to-eight-person households in most counties, with higher-cost counties higher.
When does the USDA guarantee take effect on a construction loan?: With the single-close structure, USDA's loan note guarantee may be issued at closing, before construction begins. The securitized option needs no completion-stage loan modification; the standard interest-only option may be re-amortized through a modification after completion. USDA's January 2026 training says a higher modified PITI payment alone does not require re-underwriting, but USDA and the participating lender still make the final eligibility determination.
How are payments handled during a USDA construction loan?: USDA permits a standard option with interest-only payments during construction and a securitized option with full PITI payments during construction. Either can use loan funds to establish up to 12 months of payment reserves. The standard option may need a completion-stage loan modification and re-amortization; the securitized option does not.
Can I be my own builder with a USDA construction loan?: No. USDA's January 2026 single-close training says contractors building their own residence are ineligible. The participating lender must verify the builder's single-family construction experience, required state or local license, and at least $500,000 in commercial general liability insurance.

Primary sources

Verified primary sources for this scenario

USDA Single Family Housing income limits (HB-1-3555 Appendix 5, FY 2026 PN 657)Date retrieved: 2026-07-18
USDA Single Close Construction-to-Permanent Financing (factsheet)Date retrieved: 2026-07-22
USDA Single Close Construction training (January 2026)Date retrieved: 2026-07-22
USDA Combination Construction-to-Permanent (Single Close) lenders and builders informationDate retrieved: 2026-07-22
USDA Single Close Construction-to-Permanent Q&A (Rural Development)Date retrieved: 2026-07-22
USDA Single Family Housing Guaranteed Loan ProgramDate retrieved: 2026-07-22

Related checks

Use this scenario with the next USDA checks, the source methodology, and the FAQ before taking a result to a lender.

Recommended next checks

Maximum USDA Loan Amount & County Loan Limits (2026) when the build budget raises the question of how large a USDA loan can be — the Guaranteed program sets no maximum loan amount, and the county figures buyers find belong to Section 502 Direct.
USDA Rural Development (RD) Eligibility Map when the borrower is still separating the rural property map from the household income-limit workflow before planning a build.

Maximum USDA Loan Amount & County Loan Limits (2026)USDA Rural Development (RD) Eligibility Map Check a property address USDA income limits by state and county Methodology and source dates USDA eligibility FAQ All USDA scenario templates

Sources

USDA area layerreadyVerified 2026-07-18 Census geocoderaddress inputVerified 2026-07-18 USDA income limitsFY 2026 snapshotUSDA FY 2026 income limits (effective 07/13/2026, PN 657); Verified 2026-07-18

USDA income-limit source USDA eligibility portal

By state

Check USDA eligible areas state by state

Each state page names the USDA-ineligible urbanized cores, the rural regions that stay inside the eligible-area map, and the Section 502 moderate-income floor that applies in that state. For the whole FY 2026 table in one place, see USDA income limits by state.

USDA eligibility in Florida USDA eligibility in Michigan USDA eligibility in Texas USDA eligibility in California USDA eligibility in Ohio USDA eligibility in Georgia USDA eligibility in North Carolina USDA eligibility in Idaho USDA eligibility in Pennsylvania All 50 states + DC