Rural Construction-to-Permanent Loans Announced
NAHB Immediate Past President Bobby Rayburn joined U.S. Department of Agriculture (USDA) Secretary Mike Johanns and officials from Chase Home Finance on June 6 for the announcement of a construction-to-permanent pilot for the Section 502 Guaranteed Rural Housing single-family loan program.
Aimed at increasing the availability of credit to provide more rural families the opportunity to own a home, the program will first be tested on a limited basis in California, Florida, Georgia, North Carolina, Ohio and Texas. It is expected to be operational within the next 60 days.
Construction-to-permanent loans offer some important advantages for home buyers and home builders alike. For instance, they enable buyers to lock in the terms of the permanent loan up-front, before their house is built.
“USDA and its partners in home construction and finance have responded to President Bush’s recent challenge to add 7 million new affordable homes to the market in the next 10 years,” said Johanns. “Through innovative partnerships, like the one announced today, more rural families will be better able to meet their housing needs and achieve the American Dream of homeownership.”
Johanns also recognized Chase and NAHB as outstanding partners of USDA Rural Development in meeting the critical housing needs of rural America.
“By creating this construction-to-permanent loan program, the Rural Housing Service will be offering cutting-edge financing to home buyers who — in many cases — would not otherwise be able to purchase a new home,” said Rayburn. “In addition, home builders benefit because they will know from the start of construction that their customer is qualified for the permanent loan and is very committed to the home purchase. The construction-to-permanent loan also eliminates the need for the home builder to get a construction loan from their lender.’
Loan guarantees from the USDA will make it possible for Chase to offer construction loans financing 100% of the cost of building a new home — including the lot, construction costs, closing costs and interest payments while the house is being built. Upon completion, the loan will convert to a 30-year fixed-rate mortgage loan.
For more information, e-mail Bill Renner, NAHB’s director of single-family finance, or call him at 800-368-5242 x8597.