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What You Need to Know About VA Construction Loans


What You Need to Know About VA Construction Loans
What do you need to know about VA One-Time Close construction loans? Knowing before you start looking for a lender can be a major time saver. The first thing you should know is that the Department of Veterans Affairs VA home loan benefit is for qualifying military members, veterans, and eligible military spouses and features a no money down mortgage.

That zero down mortgage is one of the biggest perks of the VA mortgage program. Did you ever think you could build a house on your own lot without making a big down payment? Some borrowers make one anyway because it can reduce the amount of the VA loan funding fee, but the zero-down option is a great one.

The Difference Between a VA Construction Loan and a Mortgage to Buy an Existing House

Comparatively speaking, buying an existing home is a faster process than building on your own land. But a VA construction mortgage gives you the ability to approve the design for your home, which makes the wait worth it for many borrowers. What do you need to know about this process?

You’ll find that some participating VA lenders will offer construction loans on certain kinds of property but not others. You may be approved to purchase an existing four-unit, mixed use property (but primarily residential) with a VA purchase loan, but you may find it harder to locate a lender willing to approve a no money down VA construction loan for the same kind of structure.

Ask your lender what kinds of property you can build with your VA loan as early in the process as possible. Shopping around for a lender is a very good idea, and this is one reason why.
You may also find that FICO score requirements are higher for construction loans than for existing construction. You should review and work on your credit as early as possible ahead of your new loan application.

Don’t Own Land?

VA One-Time Close construction loans feature the ability to include both the construction and buying land into the mortgage.  You do not have to own land to apply for a construction loan as long as you are buying land in conjunction with it. Remember, VA mortgages do not allow loans simply to purchase undeveloped land with no plans to build.

To apply for a VA construction loan, your lender will need to confirm your ability to qualify for the program--you must have or obtain a VA Certificate of Eligibility. Your lender can help you get this certificate if you don’t have one already, and you can also contact the VA to request one.

VA One-Time Close construction mortgages are for owner-occupiers. You cannot build investment property with these loans. VA borrowers should know that not all participating lenders offer VA construction mortgages, which is why it’s a very good idea to start your planning process earlier than you might if you were buying existing construction.

Remember that construction loans are more involved than buying existing construction--permits, the construction phase itself, and the need for inspections at the end of the process can take time--don’t be in a hurry to move when building a new home, You’ll be glad you took the extra time.

Remember that VA loan rules require proof of builder’s warranties--you will need to use an approved contractor who can supply you with a one-year builder warranty or a 10-year insurance protection policy when the job is done.

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OTC articles
VA One-Time Close Advantages for Veterans, Military Retirees, Active Duty

There are many advantages to building instead of buying an existing home and a lot of those advantages are as much about being able to approve the design of your home and making sure it meets your needs and goals before the ground even gets broken on the construction site.

The One-Time Close Construction Loan Process

What do buyers need to know about the One-Time Close mortgage loan process? This type of home loan is perfect for those who want to take their time to build a home to their specifications on their own lot or on land purchased in conjunction for the construction project.

What You Need to Know About VA Construction Loans

Comparatively speaking, buying an existing home is a faster process than building on your own land. But a VA construction mortgage gives you the ability to approve the design for your home, which makes the wait worth it for many borrowers. What do you need to know about this process?


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