RHS Piloting Construction/Permanent Loans

Low- and moderate-income rural residents can now get 100% construction/permanent financing under a pilot program the U.S. Rural Housing Service is conducting in six states.The single-family construction loans that automatically convert to fixed-rate 30-year loans are guaranteed by the RHS, and Chase Home Finance is funding the loans through a network of correspondent lenders and brokers. "This is the first time the agency has offered construction financing," Chase senior vice president Jack Jones said. Chase is trying to find interested builders and originators in California, Florida. Georgia, North Carolina, Ohio, and Texas to participate in the pilot program. The interest rate on the permanent 30-year loans is set at the time the construction loan is closed. Borrowers can finance the cost of purchasing the land or roll the existing debt on the land into the loan, which covers all the hard and soft costs of construction. In addition, the loans include a contingency reserve for unplanned construction changes and a reserve to pay interest, taxes, and insurance on the construction loan.