USDA Construction Loans in Texas
Quick answer: A USDA construction loan in Texas is a one-time close (single-close) construction-to-permanent loan. There's one closing before construction starts. The loan can cover the land, the build and eligible soft costs and reserves, and then it becomes your permanent USDA loan. You need a qualified, licensed builder; owner-builders aren't allowed. Not every lender offers it. All loans subject to credit and property approval.
How does a USDA one-time close construction loan work?
You close once, before the build starts; the lender pays out construction funds in draws, and the same loan becomes your long-term mortgage when the home is finished.
USDA calls this a combination construction-to-permanent loan, or single-close loan (HB-1-3555, Chapter 12, Section 6). Lenders and buyers often call it a one-time close construction loan. At closing, funds go to buy the land (or pay off what you owe on it) and pay allowed closing costs. The rest is held in a reserve and paid to the builder as work is completed and inspected. Your permanent loan terms are set at that one closing, so there's no second closing when the house is done.
- Check location and income. The land must be in a USDA-eligible area and your household must be within the income limit.
- Choose a qualified builder and agree on plans, specifications and a fixed-price contract.
- Apply and underwrite. The lender reviews you, the builder, the plans and the appraisal based on the finished home.
- USDA review. USDA issues a Conditional Commitment if the file meets program rules.
- Single closing. Land is paid for and the construction reserve is set up.
- Construction and draws. The lender releases funds after inspections and your written approval.
- Completion. Final inspection and documentation confirm the home is complete.
Is a USDA one-time close loan the same as single-close?
Yes. "One-time close," "single-close" and "construction-to-permanent" describe the same structure: one loan and one closing that cover the build and then become your permanent USDA mortgage.
HB-1-3555 uses the terms "combination construction-to-permanent loan" and "single-close." Not every lender offers it, so ask Danny Nassar, NMLS 220172, whether Canopy Mortgage, LLC currently offers USDA single-close construction for your build.
What are the builder requirements?
The builder must be approved by the lender after license, insurance and reference checks, and must have experience building similar homes.
- Two or more years of experience building single-family homes similar to yours
- A state-issued construction or contractor license where state or local law requires one
- Commercial general liability insurance at the level USDA requires
- Not building their own residence (owner-builders are ineligible)
Your builder must hold any license or registration that state or local law requires where the home is built (HB-1-3555, Chapter 12). The lender's builder review applies either way.
What can a USDA construction loan cover?
Land, hard construction costs, eligible soft costs, and reserves, as long as each item is customary for homes in the area.
| Category | Examples |
|---|---|
| Land | Buying the lot, or paying off what you owe on land you'll build on |
| Hard costs | Items in the builder's contract, plus outside work like well and septic installation, driveways, utility hookups and landscaping |
| Soft costs | Appraisal, inspections, survey, permits and plan review, architecture or design, engineering, title updates, lender construction administration |
| Reserves | Contingency reserve, interest reserve, and a payment reserve for principal, interest, taxes and insurance during the build |
| Other | Project and builder review fees, tax and insurance reserves, other reasonable and customary closing costs |
The total is limited by USDA's maximum loan-to-value rules, which use the appraised value of the finished home.
What isn't allowed?
Owner-builder projects, condominiums of any kind, and costs that aren't customary for homes in the area.
- You can't act as your own builder.
- Condos, including detached and site condominiums, can't use single-close.
- Items that aren't commonly and customarily included in the cost of other homes in the area aren't eligible.
Can I build a manufactured or modular home?
Yes. USDA's single-close feature can include modular and manufactured home construction, subject to the same builder and property rules.
For manufactured homes, USDA's Chapter 13 rules also apply: a new unit, a permanent foundation, HUD labels and real-property status. See USDA manufactured home loans in Texas.
What if I already have a lot or a construction loan?
Land debt can be paid off at the single closing, and USDA treats refinancing an interim construction or lot loan as a purchase, not a refinance.
If you've already bought land intending to build, the land payoff can be part of the single-close loan. If you've already started with a separate interim construction loan, ask Danny Nassar, NMLS 220172, about USDA's rules for converting it. Not every lender offers USDA single-close construction, and lender requirements vary; Danny will confirm what Canopy Mortgage offers for your project. Call 512-743-5512.
Source: USDA Handbook HB-1-3555, Chapter 12, Section 6 (12.12 to 12.27). All loans subject to credit and property approval.
Frequently asked questions
Can I be my own builder with a USDA loan?
No. Owner-builders are ineligible for USDA single-close construction, and a builder can't use it to build their own home.
Can I buy land with a USDA loan?
Only as part of building a home on it. Land alone isn't an eligible USDA purchase.
Do I make payments during construction?
USDA allows a payment reserve for principal, interest, taxes and insurance during construction to be included in the loan. Ask how the lender handles it for your build.
Does the land have to be in an eligible area?
Yes. The property must be in a USDA-eligible rural area. Check the address or parcel location on the USDA map.
Talk with Danny about your Texas USDA loan
Tell Danny the county you're buying in and who lives in your household. He'll walk you through the USDA rules that apply to you and the next steps.
All loans subject to credit and property approval.