The Quick Read: Often yes, but not automatically. No FHA, USDA or HUD-184 rule bans assistance on a newly built home, so the answer comes down to the assistance program’s own property rules. Some programs welcome new builds and some exclude certain build types. Check the program, the build type and the construction schedule before you sign a builder contract.
Why Is the Answer “It Depends”?
Two sets of rules meet on a new build. The first set belongs to the government-backed first mortgage. The second belongs to the assistance layered on top of it.
The first mortgage is rarely the problem. All three government programs finance new homes. The assistance rules are where files get tripped up.
Across the wholesale programs Lendmire places files with, assistance sits behind an FHA, USDA or HUD-184 first lien. Lendmire is a mortgage broker, and it arranges the financing through wholesale lenders. The first lien sets the construction paperwork. The assistance sets the eligible property types. Both have to say yes.
That is why you find conflicting answers online. One state agency says new construction is welcome. Another program excludes spec homes or certain build types. Both are right about their own program. Neither speaks for the whole category.
What Counts as “New Construction”?
The word means different things to different agencies. It matters because the definition decides which documents your file needs.
FHA treats new construction as a home that is proposed, under construction, or less than one year old. HUD’s Handbook 4000.1 drafting table lays out that definition and requires the lender to certify the home is 100 percent complete.
USDA’s guaranteed-loan rule lists the construction or purchase of a new dwelling as an eligible purpose. A “new dwelling” means a home to be built, under construction, or under one year old and never occupied. A home under a year old that someone has already lived in counts as existing, not new. Both points come from 7 CFR Part 3555 and USDA’s existing-dwelling notes.
HUD-184 is authorized to guarantee loans for construction, acquisition or rehabilitation of one- to four-family homes, per HUD’s Section 184 FAQs.
Three common build types behave differently:
| Build type | What it means | Typical assistance fit |
|---|---|---|
| Finished spec home | Builder-completed, ready to close | Usually the easiest fit |
| To-be-built home | Contract signed before construction | Depends on timing and program rules |
| Build on your own land | You own the lot, a loan funds the build | Often not covered by purchase-based assistance |
How Does Assistance Fit on Top of a Government First Mortgage?
The first mortgage comes first. Assistance comes second, either as a grant or as a second lien.
Across the programs we arrange, there are four shapes:
- Grant-style assistance: 2% or 3.5% of the purchase price, with nothing to repay. It is released at closing. It pairs with FHA first liens only, and the credit floor is 620. Eligibility means household income at or below 140% of area median income, or a qualifying category. Those categories include first responders, educators, medical workers, civil servants, military personnel, first-time buyers and buyers in underserved census tracts. A HUD-approved homebuyer education course is required. It is not offered in Washington.
- Forgivable second lien: 3.5% of the lesser of price or appraised value. It carries no interest and no monthly payment. It is forgiven after the first 36 or 60 on-time first-lien payments. The credit floor is 640. It pairs with FHA, HUD-184 and USDA first liens on one- to two-unit homes.
- Repayable second lien: 3.5% or 5% of the lesser of price or value. This is a real loan. It carries interest, a monthly payment, 30-year amortization and a balloon due in year 10. At 5%, it also covers closing costs. The credit floor is 660.
- Refinance-cost second lien: 1% to 3.5% of the balance on an FHA refinance. This one is not a purchase tool, so it matters only after you own the home.
Nobody has to be a first-time buyer. Repeat buyers qualify.
Two more limits matter. Assistance applies only to an owner-occupied primary residence, never to a second home or rental. And no option combines with another assistance program. These programs are arranged through wholesale lenders, subject to program guidelines and full underwriting. Nothing here is a commitment to lend.
If you want the full menu in one place, Lendmire’s down payment assistance programs page lays out each shape side by side.
What Does the First Lien Require on a New Build?
New construction adds paperwork that a resale home skips. Skipping it stalls the file.
FHA. The appraiser needs the builder’s certification before the appraisal. Form HUD-92541 must arrive fully executed, signed and dated no more than 30 days before the appraisal was ordered. HUD also kept the Warranty of Completion (HUD-92544), signed by builder and buyer. A 2018 final rule dropped the old 10-year protection plan requirement but kept that warranty of completion.
The FHA floor underneath is a minimum required investment of 3.5% of the adjusted value, per HUD. Our grant-style option can fund part of that investment on a qualifying file. Annual and upfront mortgage insurance still apply to the FHA loan, and the upfront premium (1.75% of the base loan) can be financed.
USDA. The file needs certified plans, inspections and a one-year builder warranty. The builder can use the HUD-92544 or Form RD 1924-19. Owner-builders cannot self-warrant. USDA’s Chapter 12 draft handbook describes these options, and it is a draft, so treat the details as directional. A new home that cannot meet the plan, inspection and warranty requirements is limited to 90 percent loan-to-value. USDA otherwise allows 100 percent financing based on appraised value.
HUD-184. New construction requires detailed plans and specifications and a builder’s certification. A 2024 rule clarified that HUD does not guarantee each construction advance on its own. The whole loan is guaranteed once the Loan Guarantee Certificate issues.
None of this is exotic. It does mean your builder has to be willing to produce HUD or USDA paperwork. Some builders do this every week. Others have never seen the forms.
The Catches That Sink New-Build Files
Most failed files trip on logistics, not eligibility. Here are the five that come up most.
1. Timing between deposits and closing. Builders often want deposits months before the home is done. Assistance funds usually arrive only at closing. That gap is the biggest practical risk, and no agency source puts a number on it. Plan your own cash for the deposit and upgrades.
2. Construction delays. A closing date is only a target on a home still being framed. Your assistance reservation and your pricing window have to survive a late completion. Ask what happens if the build slips.
3. Value versus price. Several shapes are tied to the lesser of price or appraised value. Upgrades add to the contract price, but they do not always add to the appraisal. If the home appraises low, the assistance and the first lien both shrink. Lendmire’s piece How a Low Appraisal Resizes a New Construction Jumbo Loan Down Payment shows the same mechanic on a larger loan.
4. Builder money. Builder concessions are interested-party contributions. FHA caps them at 6 percent of the purchase price. They can help with closing costs, but they cannot stand in for your required investment. Going over the cap can reduce the maximum loan.
5. Builder-preferred lenders. Many builders steer you toward an affiliated lender, often with incentives. That lender may not offer the assistance you want. You can usually use a different lender, but ask early and compare the full offer, not just the incentive.
Honestly, number one is the one that surprises people. Everything else is paperwork. The deposit gap is cash you need on day one.
Edge Cases Worth Knowing
Building on your own land. FHA has a separate “Building on Own Land” section. Many assistance programs cover only a purchase from a seller or builder. If you own the lot, assume assistance may not apply until a lender confirms it.
Construction-to-permanent loans. These single-close loans follow their own rules. Assistance written for a completed-home purchase may not fit them. Confirm the structure before you commit to a builder.
Flood zones. USDA will not guarantee a loan on a new or proposed home in a special flood hazard area unless the lender gets a letter of map change or completes an alternatives analysis. A lot that looks fine can still stop a USDA file.
Manufactured homes. They carry their own foundation and HUD-standard rules, and assistance programs often treat them differently. Check each one directly.
Later refinance. A silent second cannot be rolled into a USDA guaranteed refinance. It must be subordinated or paid off. Read the payoff terms of your second lien before you build a refinance plan around it.
A Simple Buyer Scenario
Say you are a repeat buyer moving up. Your income is above the grant’s area median income test, and you are not a first responder or educator. You are eyeing a finished spec home.
The grant may not fit. The forgivable second or repayable second can, because the income test that applies to the grant is not attached to them. The forgivable second asks nothing monthly and is forgiven after 36 or 60 on-time first-lien payments. The repayable second carries a monthly payment and a balloon in year 10. Your budget tolerance decides between them.
Now change one thing. The home is to-be-built, closing many months out. The first-lien paperwork is heavier, and your deposit comes due long before assistance arrives. The same financing can work, but the cash plan and schedule now carry the file.
Questions to Ask Before You Sign
Ask the builder:
- Do you routinely deliver HUD or USDA new-construction paperwork?
- Can I use a lender outside your preferred lender?
- What happens to my closing date if construction slips?
- How much of the price is upgrades, and do they appear in the appraisal?
Ask the lender:
- Does this assistance allow this specific build type?
- When do the assistance funds arrive compared with my deposits?
- What happens to the reservation if closing moves?
- Is the second lien repayable, and when does it come due?
If Assistance Does Not Fit the Build
Sometimes the answer is no. A program may exclude your build type. Your timeline may not survive.
You still have options. A finished spec home often fits where a to-be-built one does not. A different assistance shape may allow what the first one excluded. The FHA minimum investment can come from your own savings or from eligible gift funds. An HUD-approved housing counselor can help you sort the options before you commit to a builder contract.
Key Terms Defined
Minimum required investment: The smallest amount you must put in on an FHA loan, 3.5% of the adjusted value.
Second lien: A loan that sits behind your main mortgage and is repaid or forgiven under its own terms.
Forgivable second: A second lien that disappears if you make enough on-time payments on the first mortgage.
Balloon: A lump sum due at a set point, in this case year 10 on the repayable second.
Interested-party contribution: Money from a builder or seller that goes toward your closing costs, capped by FHA.
Builder’s certification: A signed statement from the builder that the plans and site meet HUD standards.
Frequently Asked Questions
Can assistance cover builder deposits?
Usually not. Assistance funds typically arrive at closing, while builders often collect deposits earlier. Plan to cover deposits and upgrades from your own savings, and confirm the funding timing with your lender.
Does my builder have to use my lender?
No. Many builders prefer their affiliated lender and may offer incentives to use it. You can generally choose another, but that lender must be able to produce the new-construction documents and offer the assistance you want. Compare the full offer, not just the incentive.
Can assistance cover closing costs on a new build?
Sometimes. The repayable second at 5% includes closing costs and prepaid items. The grant and forgivable options go toward the minimum required investment. Builder concessions can also cover closing costs, within FHA’s cap on interested-party contributions.
Can I use assistance with a construction loan?
It depends on the structure. Assistance written for a purchase of a completed or to-be-built home may not fit a loan that funds construction in draws. Ask your lender whether the program supports a construction-to-permanent file before you commit.
Can I use assistance on a second home or rental?
No. Assistance applies only to an owner-occupied primary residence.
Next Step
If you are buying a primary home and want to see whether a down payment assistance option fits your file, Lendmire can help you compare the grant, forgivable and repayable structures alongside an FHA, USDA or HUD-184 first mortgage. Repeat buyers are welcome, and the call is a good time to flag your build type and schedule.
The best new-build plan starts with the schedule: line up the builder’s timeline, your deposit cash and the assistance window before the contract, not after.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps home buyers in 16 states pair an FHA, USDA or HUD-184 first lien with a down payment assistance option arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. USDA
2. HUD’s Handbook 4000.1 drafting table
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Six-Figure Earner With Student Loans Get Down Payment Assistance? · How A Repayable Down Payment Assistance Second Affects Your DTI? · Does Down Payment Assistance Have to Be Paid Back?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.