Government-Backed Financing

USDA Rural Development Loan: Steel Building Financing Guide

Government-backed zero-down-payment loan for rural properties. Available through USDA-approved lenders for primary residences in eligible areas.

Good for Steel BuildingsBest for: Rural homebuyers building a barndominium or steel-frame home who want zero money down

Min Down Payment

Typical Rates

5.5–6.5%

Max Term

30 years

Min Credit Score

620

Program Overview

The USDA Section 502 Guaranteed Loan Program enables zero-down-payment homeownership in rural communities. Administered by USDA Rural Development, it offers below-market interest rates and low guarantee fees. The Single-Close Construction-to-Permanent option combines land purchase, construction, and permanent financing in one loan.

How It Works

USDA guarantees the loan issued by an approved lender (not a direct government loan). Borrowers go through both lender underwriting and USDA conditional commitment review. Construction loans use the Single-Close program with draws released at inspection milestones.

Administered By

USDA Rural Development (Rural Housing Service)

Program Types

Section 502 Guaranteed LoanSection 502 Direct LoanSingle-Close Construction-to-Permanent

Eligibility Requirements

Credit Score

620+ (recommended)

640+ for automated underwriting. Below 640 requires manual underwriting with compensating factors.

Down Payment

100% financing available. The 1% upfront guarantee fee can also be financed into the loan.

Income Limit

≤115% Area Median Income

Total household income (all adults) must not exceed 115% of the area's median. Deductions available for dependents ($480 each), childcare, elderly/disabled ($400), and medical expenses.

Occupancy

Primary residence only

Must be borrower's primary home. Cannot be used for investment, vacation, or income-producing properties.

Eligible Property Types

primary residence

Eligible Building Types

barndominiumresidential

Additional Requirements

Property Location

USDA-eligible rural area

Most areas outside cities with 35,000+ population. Check eligibility at eligibility.sc.egov.usda.gov

Citizenship

U.S. citizen or qualified alien

Must be a U.S. citizen, non-citizen national, or qualified alien

DTI Ratio

29%/41% standard

29% front-end (housing) and 41% back-end (total debt). Can be exceeded with strong compensating factors like residual income.

Step-by-Step Process

Check Property Eligibility

1 day

Verify your property location qualifies as a USDA-eligible rural area using the USDA eligibility map tool.

Use eligibility.sc.egov.usda.gov to check your exact address

Many suburban areas surprisingly qualify

Pre-Qualification

1–3 days

Contact a USDA-approved lender to review your income, credit, and DTI ratios. Confirm you meet the income limits for your county.

Ask specifically if they offer Single-Close Construction loans

Get pre-qualified with 2–3 lenders for comparison

Find a Qualified Builder

1–4 weeks

Select a licensed, insured builder experienced with USDA construction projects. The builder must be approved by the lender.

Ask for references from past USDA-financed steel building projects

Verify builder has proper licensing and insurance

Submit Full Application

1–2 weeks

Complete the loan application with all required documentation including construction plans, builder contract, and cost estimates.

Have construction plans stamped by a licensed engineer

Include a detailed cost breakdown

Lender Underwriting

2–4 weeks

The lender reviews your complete application, orders the appraisal, and verifies all documentation.

Prepare a comparable sales package for the appraiser

Respond quickly to any conditions or requests

USDA Conditional Commitment

2–6 weeks

After lender approval, the file goes to USDA for their conditional commitment review — a second layer of approval.

This timeline varies by state office workload

Your lender cannot control USDA review speed

Construction Phase

4–12 months

After closing, construction begins. Funds are disbursed through a draw schedule with inspections at each milestone.

Keep detailed records of all construction progress

Schedule inspections promptly to avoid delays

Final Conversion

2–4 weeks

After construction completion and final inspection, the loan converts to a permanent 30-year fixed-rate mortgage.

Final appraisal must confirm value meets or exceeds loan amount

Move in within 60 days of completion

Financial Details

Down Payment

0% — one of the only true zero-down programs

Interest Rates

Typically 0.5–0.75% below conventional rates. Approximately 5.5–6.5% as of 2026.

Loan Terms

30-year fixed rate standard

Fees

1% upfront guarantee fee (can be financed) + 0.35% annual fee (paid monthly as part of mortgage payment)

Insurance

No traditional PMI required. The annual guarantee fee serves a similar function at 0.35% — significantly lower than FHA's 0.55% or conventional PMI (0.5–1.5%).

Closing Costs

2–5% typical. Seller can pay up to 6%. Can be rolled into loan if appraised value exceeds purchase price.

Loan Limits

No hard maximum — limited by borrower's DTI and income eligibility rather than a dollar cap

Steel Building Considerations

USDA loans can finance barndominiums and steel-frame homes, but the approval process requires more effort than for conventional stick-built homes.

Common Challenges

Finding USDA-approved lenders experienced with steel/metal construction
Appraisals require comparable sales — barndominiums may lack local comps
Property must have a residential appearance and character
Zoning must allow residential steel-frame structures

Tips for Approval

Design residentially with covered porch, residential windows, and landscaping
Build in barndominium-friendly areas (TX, OK, TN, AL) where comps exist
Hire a builder who has completed USDA-financed barndominiums before
Prepare a comparable sales package for the appraiser proactively
Ensure full IRC code compliance with engineering stamps

Lender Advice

Ask specifically: 'Do you offer USDA Single-Close Construction loans for steel-framed homes?' Many USDA lenders do not offer the construction product at all.

Pros & Cons

Advantages

Zero down payment
One of the only true 0% down programs available — no down payment required at all.
Below-market interest rates
Rates typically run 0.5–0.75% lower than conventional loans.
No PMI
Only a 0.35% annual guarantee fee instead of traditional PMI (0.5–1.5%).
Lenient credit requirements
620 minimum credit score, with manual underwriting available below 640.
Seller can pay closing costs
Sellers can contribute up to 6% of the purchase price toward buyer closing costs.
No loan limit cap
Unlike FHA/VA, there is no maximum loan amount — limited only by DTI and income.
Guarantee fee can be financed
The 1% upfront fee can be rolled into the loan, requiring zero cash at closing.
Single-close construction available
One closing for land, construction, and permanent financing saves time and money.

Disadvantages

Rural areas only
Property must be in a USDA-eligible area — most urban and many suburban locations excluded.
Income limits apply
Household income cannot exceed 115% of area median — higher earners are disqualified.
Slow USDA review
After lender approval, USDA review adds 2–6 weeks to the timeline.
Limited construction lenders
Few USDA-approved lenders offer the Single-Close Construction product.
Barndominium appraisal challenges
Steel buildings may lack comparable sales, making appraisals difficult.
Primary residence only
Cannot be used for second homes, investment properties, or commercial buildings.
Guarantee fee adds to cost
1% upfront + 0.35% annual fee is not free — it adds to the total loan cost.
All household income counted
Income of all adults in the household is included, even non-borrowers.

Common Pitfalls

Failing income eligibility by a small margin

Many buyers assume only the borrower's income counts, but USDA counts ALL adult household income.

How to avoid: Use USDA income deductions: $480 per dependent, $400 for elderly/disabled household members, and childcare deductions. These can bring you under the limit.

Choosing a lender without construction experience

Many USDA-approved lenders only do purchase loans — they don't offer the Single-Close Construction product.

How to avoid: Ask specifically: 'Do you offer USDA Single-Close Construction-to-Permanent loans for steel-framed homes?' Get this confirmed in writing before applying.

Appraisal coming in below loan amount

Barndominiums and steel homes often lack comparable sales in the area, leading to low appraisals.

How to avoid: Proactively prepare a comparable sales package for the appraiser. Include recent barndominium sales from nearby counties. Build in areas with existing barndominium comps.

Property not in an eligible area

Buyers assume rural means eligible, but some rural areas near growing cities have lost eligibility.

How to avoid: Check the exact property address at eligibility.sc.egov.usda.gov BEFORE making any commitments. Eligibility maps update periodically.

Required Documents

Government-issued photo IDRequired

Valid driver's license, passport, or state ID for all borrowers

Income documentationRequired

Pay stubs (30 days), W-2s (2 years), tax returns (2 years) for all household adults

Bank statementsRequired

Most recent 2 months of all bank, investment, and retirement accounts

Employment verificationRequired

Employer contact information and verification of employment letter

Credit authorizationRequired

Written authorization for the lender to pull your credit report

Construction plans & specificationsRequired

Complete architectural plans with engineer stamp, material specifications, and site plan

Builder contractRequired

Signed construction contract with licensed, insured builder including detailed cost breakdown

Lot purchase agreementRequired

Purchase contract for the land if not already owned

Property eligibility printoutRequired

Screenshot or printout from USDA eligibility map confirming property location qualifies

Comparable sales packageOptional

Recent sales of similar steel/barndominium properties in the area for the appraiser

Frequently Asked Questions

Can I get a USDA loan for a barndominium?

Yes, USDA can finance barndominiums, but the property must have a residential appearance and character. Design it with residential features — covered porch, standard windows, landscaping. The term 'barndominium' isn't a disqualifier, but the property must look and function like a home.

How do I know if my property is in a USDA-eligible area?

Use the USDA eligibility map at eligibility.sc.egov.usda.gov. Enter your exact property address. Generally, areas outside cities with 35,000+ population qualify, but boundaries vary.

What are the income limits for USDA loans?

Your total household income cannot exceed 115% of the area median income (AMI). This includes income from ALL adults in the household, not just the borrowers. Check current limits at the USDA income eligibility tool for your specific county.

How long does USDA approval take?

After your lender approves the loan, it goes to USDA for a conditional commitment review. This typically takes 2–6 weeks depending on the state office workload. Total timeline from application to closing is usually 45–90 days.

Is there really no down payment?

Correct — USDA offers true 0% down payment financing. The 1% upfront guarantee fee can also be financed into the loan, meaning you can close with essentially zero cash out of pocket (though you may still need funds for earnest money and inspections).

What is the USDA guarantee fee?

There are two fees: a 1% upfront guarantee fee (can be financed into the loan) and a 0.35% annual fee (paid monthly as part of your mortgage payment). These are significantly lower than FHA mortgage insurance or conventional PMI.

Can I use a USDA loan for a shop or garage?

USDA loans are for primary residences only. A detached shop or garage that is part of a residential property may be included, but the primary structure must be a home. Standalone commercial shops or agricultural buildings do not qualify.

Do USDA loans have a maximum loan amount?

No. Unlike FHA and conventional conforming loans, USDA does not have a hard maximum loan amount. Your borrowing capacity is limited by your income, DTI ratios, and the appraised value of the property.

Can the seller pay my closing costs?

Yes, sellers can contribute up to 6% of the purchase price toward buyer closing costs. Additionally, if the appraised value exceeds the purchase price, closing costs can potentially be rolled into the loan.

What if my income is slightly over the limit?

USDA allows several deductions that can reduce your adjusted household income: $480 per dependent under 18, $400 for elderly or disabled household members, and deductions for childcare expenses. These deductions can bring many families under the income ceiling.

Official Sources & Resources

Verify the information above directly from these official sources. Rates, terms, and eligibility requirements change frequently — always confirm with the lender or program administrator.

USDA Guaranteed Loan ProgramOfficial program overview and eligibility requirements

USDA Property Eligibility MapCheck if your property location qualifies

USDA Direct Loan ProgramFor very-low and low-income borrowers

USDA Guaranteed Loan Fact SheetQuick reference guide from USDA

Rural Housing ServiceAbout the administering agency

CFPB Loan Options GuideConsumer Financial Protection Bureau comparison

NerdWallet USDA Loan GuideComprehensive consumer guide

Bankrate USDA Loan GuideRates and program comparison

In This Guide

Disclaimer: This guide is for informational purposes only and does not constitute financial, legal, or professional advice. Interest rates, loan terms, eligibility requirements, and program details change frequently. Always verify current information with the lender or program administrator before making financial decisions. Homestead Steel Structures & Design is not a lender, financial advisor, or mortgage broker. Last updated February 2026.

Ready to Finance Your Steel Building?

We help connect you with lenders experienced in steel building and barndominium financing — so you can focus on your build, not the paperwork.

Get Your Free Quote Explore Building Series

Government-Backed Financing

USDA Rural Development Loan: Steel Building Financing Guide

Government-backed zero-down-payment loan for rural properties. Available through USDA-approved lenders for primary residences in eligible areas.

Good for Steel BuildingsBest for: Rural homebuyers building a barndominium or steel-frame home who want zero money down

Min Down Payment

Typical Rates

5.5–6.5%

Max Term

30 years

Min Credit Score

620

Program Overview

How It Works

Administered By

USDA Rural Development (Rural Housing Service)

Program Types

Section 502 Guaranteed LoanSection 502 Direct LoanSingle-Close Construction-to-Permanent

Eligibility Requirements

Credit Score

620+ (recommended)

640+ for automated underwriting. Below 640 requires manual underwriting with compensating factors.

Down Payment

100% financing available. The 1% upfront guarantee fee can also be financed into the loan.

Income Limit

≤115% Area Median Income

Total household income (all adults) must not exceed 115% of the area's median. Deductions available for dependents ($480 each), childcare, elderly/disabled ($400), and medical expenses.

Occupancy

Primary residence only

Must be borrower's primary home. Cannot be used for investment, vacation, or income-producing properties.

Eligible Property Types

primary residence

Eligible Building Types

barndominiumresidential

Additional Requirements

Property Location

USDA-eligible rural area

Most areas outside cities with 35,000+ population. Check eligibility at eligibility.sc.egov.usda.gov

Citizenship

U.S. citizen or qualified alien

Must be a U.S. citizen, non-citizen national, or qualified alien

DTI Ratio

29%/41% standard

29% front-end (housing) and 41% back-end (total debt). Can be exceeded with strong compensating factors like residual income.

Step-by-Step Process

Check Property Eligibility

1 day

Verify your property location qualifies as a USDA-eligible rural area using the USDA eligibility map tool.

Use eligibility.sc.egov.usda.gov to check your exact address

Many suburban areas surprisingly qualify

Pre-Qualification

1–3 days

Contact a USDA-approved lender to review your income, credit, and DTI ratios. Confirm you meet the income limits for your county.

Ask specifically if they offer Single-Close Construction loans

Get pre-qualified with 2–3 lenders for comparison

Find a Qualified Builder

1–4 weeks

Select a licensed, insured builder experienced with USDA construction projects. The builder must be approved by the lender.

Ask for references from past USDA-financed steel building projects

Verify builder has proper licensing and insurance

Submit Full Application

1–2 weeks

Complete the loan application with all required documentation including construction plans, builder contract, and cost estimates.

Have construction plans stamped by a licensed engineer

Include a detailed cost breakdown

Lender Underwriting

2–4 weeks

The lender reviews your complete application, orders the appraisal, and verifies all documentation.

Prepare a comparable sales package for the appraiser

Respond quickly to any conditions or requests

USDA Conditional Commitment

2–6 weeks

After lender approval, the file goes to USDA for their conditional commitment review — a second layer of approval.

This timeline varies by state office workload

Your lender cannot control USDA review speed

Construction Phase

4–12 months

After closing, construction begins. Funds are disbursed through a draw schedule with inspections at each milestone.

Keep detailed records of all construction progress

Schedule inspections promptly to avoid delays

Final Conversion

2–4 weeks

After construction completion and final inspection, the loan converts to a permanent 30-year fixed-rate mortgage.

Final appraisal must confirm value meets or exceeds loan amount

Move in within 60 days of completion

Financial Details

Down Payment

0% — one of the only true zero-down programs

Interest Rates

Typically 0.5–0.75% below conventional rates. Approximately 5.5–6.5% as of 2026.

Loan Terms

30-year fixed rate standard

Fees

1% upfront guarantee fee (can be financed) + 0.35% annual fee (paid monthly as part of mortgage payment)

Insurance

No traditional PMI required. The annual guarantee fee serves a similar function at 0.35% — significantly lower than FHA's 0.55% or conventional PMI (0.5–1.5%).

Closing Costs

2–5% typical. Seller can pay up to 6%. Can be rolled into loan if appraised value exceeds purchase price.

Loan Limits

No hard maximum — limited by borrower's DTI and income eligibility rather than a dollar cap

Steel Building Considerations

USDA loans can finance barndominiums and steel-frame homes, but the approval process requires more effort than for conventional stick-built homes.

Common Challenges

Finding USDA-approved lenders experienced with steel/metal construction
Appraisals require comparable sales — barndominiums may lack local comps
Property must have a residential appearance and character
Zoning must allow residential steel-frame structures

Tips for Approval

Design residentially with covered porch, residential windows, and landscaping
Build in barndominium-friendly areas (TX, OK, TN, AL) where comps exist
Hire a builder who has completed USDA-financed barndominiums before
Prepare a comparable sales package for the appraiser proactively
Ensure full IRC code compliance with engineering stamps

Lender Advice

Ask specifically: 'Do you offer USDA Single-Close Construction loans for steel-framed homes?' Many USDA lenders do not offer the construction product at all.

Pros & Cons

Advantages

Zero down payment
One of the only true 0% down programs available — no down payment required at all.
Below-market interest rates
Rates typically run 0.5–0.75% lower than conventional loans.
No PMI
Only a 0.35% annual guarantee fee instead of traditional PMI (0.5–1.5%).
Lenient credit requirements
620 minimum credit score, with manual underwriting available below 640.
Seller can pay closing costs
Sellers can contribute up to 6% of the purchase price toward buyer closing costs.
No loan limit cap
Unlike FHA/VA, there is no maximum loan amount — limited only by DTI and income.
Guarantee fee can be financed
The 1% upfront fee can be rolled into the loan, requiring zero cash at closing.
Single-close construction available
One closing for land, construction, and permanent financing saves time and money.

Disadvantages

Rural areas only
Property must be in a USDA-eligible area — most urban and many suburban locations excluded.
Income limits apply
Household income cannot exceed 115% of area median — higher earners are disqualified.
Slow USDA review
After lender approval, USDA review adds 2–6 weeks to the timeline.
Limited construction lenders
Few USDA-approved lenders offer the Single-Close Construction product.
Barndominium appraisal challenges
Steel buildings may lack comparable sales, making appraisals difficult.
Primary residence only
Cannot be used for second homes, investment properties, or commercial buildings.
Guarantee fee adds to cost
1% upfront + 0.35% annual fee is not free — it adds to the total loan cost.
All household income counted
Income of all adults in the household is included, even non-borrowers.

Common Pitfalls

Failing income eligibility by a small margin

Many buyers assume only the borrower's income counts, but USDA counts ALL adult household income.

How to avoid: Use USDA income deductions: $480 per dependent, $400 for elderly/disabled household members, and childcare deductions. These can bring you under the limit.

Choosing a lender without construction experience

Many USDA-approved lenders only do purchase loans — they don't offer the Single-Close Construction product.

How to avoid: Ask specifically: 'Do you offer USDA Single-Close Construction-to-Permanent loans for steel-framed homes?' Get this confirmed in writing before applying.

Appraisal coming in below loan amount

Barndominiums and steel homes often lack comparable sales in the area, leading to low appraisals.

How to avoid: Proactively prepare a comparable sales package for the appraiser. Include recent barndominium sales from nearby counties. Build in areas with existing barndominium comps.

Property not in an eligible area

Buyers assume rural means eligible, but some rural areas near growing cities have lost eligibility.

How to avoid: Check the exact property address at eligibility.sc.egov.usda.gov BEFORE making any commitments. Eligibility maps update periodically.

Required Documents

Government-issued photo IDRequired

Valid driver's license, passport, or state ID for all borrowers

Income documentationRequired

Pay stubs (30 days), W-2s (2 years), tax returns (2 years) for all household adults

Bank statementsRequired

Most recent 2 months of all bank, investment, and retirement accounts

Employment verificationRequired

Employer contact information and verification of employment letter

Credit authorizationRequired

Written authorization for the lender to pull your credit report

Construction plans & specificationsRequired

Complete architectural plans with engineer stamp, material specifications, and site plan

Builder contractRequired

Signed construction contract with licensed, insured builder including detailed cost breakdown

Lot purchase agreementRequired

Purchase contract for the land if not already owned

Property eligibility printoutRequired

Screenshot or printout from USDA eligibility map confirming property location qualifies

Comparable sales packageOptional

Recent sales of similar steel/barndominium properties in the area for the appraiser

Frequently Asked Questions

Can I get a USDA loan for a barndominium?

How do I know if my property is in a USDA-eligible area?

Use the USDA eligibility map at eligibility.sc.egov.usda.gov. Enter your exact property address. Generally, areas outside cities with 35,000+ population qualify, but boundaries vary.

What are the income limits for USDA loans?

How long does USDA approval take?

Is there really no down payment?

What is the USDA guarantee fee?

Can I use a USDA loan for a shop or garage?

Do USDA loans have a maximum loan amount?

Can the seller pay my closing costs?

What if my income is slightly over the limit?

Official Sources & Resources

Verify the information above directly from these official sources. Rates, terms, and eligibility requirements change frequently — always confirm with the lender or program administrator.

USDA Guaranteed Loan ProgramOfficial program overview and eligibility requirements

USDA Property Eligibility MapCheck if your property location qualifies

USDA Direct Loan ProgramFor very-low and low-income borrowers

USDA Guaranteed Loan Fact SheetQuick reference guide from USDA

Rural Housing ServiceAbout the administering agency

CFPB Loan Options GuideConsumer Financial Protection Bureau comparison

NerdWallet USDA Loan GuideComprehensive consumer guide

Bankrate USDA Loan GuideRates and program comparison

In This Guide

Ready to Finance Your Steel Building?

We help connect you with lenders experienced in steel building and barndominium financing — so you can focus on your build, not the paperwork.

Get Your Free Quote Explore Building Series