USDA Technical Handbook HB-1-3555 §12.12 — Single-Close Features

USDA HB-1-3555, Chapter 12, § 12.12 — Single-Close Features

Effective 2025-05-05 · USDA chapter revision · Procedure Notice 640

A single-close loan combines the features of a construction loan, which is a shortterm interim loan for financing the cost of construction, and the traditional long-term permanent residential mortgage. The approved lender makes the loan to an eligible applicant. There is a one-time closing prior to the start of construction. At closing, funds are disbursed to cover the cost of land and applicable closing costs, subject to the maximum loan to value. The lender will be responsible for managing the disbursement of the loan proceeds during construction to the builder/contractor from custodial account known as the "lenders construction holdback." Written approval from the borrower must Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. be obtained prior to each draw payment. In GUS, the lender will select Purchase as the loan purpose type on the Loan and Property Information page. On the Lender Loan Information page, the lender will identify the transaction detail as ConstructionConversion/Construction-to-Permanent and select the Single-Closing radio button. If the applicant is currently renting, the rent payment may be excluded from the total debt ratio if the lender obtains documentation verifying the applicant will no longer be liable for rent payments under the lease agreement once the financed single-close construction home is completed. If the applicant is currently renting and will remain liable for rent payments under the lease agreement even after the single-close construction home is completed, the rent payment must be included in the total debt ratio. If the applicant’s current principal residence is pending sale, but the transaction will not be complete prior to the commencement of the applicant’s new SFHGLP construction loan, the existing PITI payment and the proposed PITI payment must be used in qualifying the applicant for the new guaranteed mortgage loan. The lender may exclude the existing PITI payment under the following conditions: x The new loan is a SFHGLP single close construction loan; x The lender can document an executed sales contract for the current residence; and x The lender can confirm that any financing contingencies have been cleared. The permanent mortgage loan interest rate, which is used for underwriting, is established at closing. The Loan Note Guarantee may be issued once the interim construction loan is closed without waiting for completion of the subject property. An optional checklist, Attachment 12-C of this Chapter, has been developed to assist lenders with their project review.

Source: USDA HB-1-3555, Chapter 12, § 12.12 — Single-Close Features · source URL · snapshot 0466acd1ea2d17a4