The VA One-Time Close Construction Loan
For many years, we have helped veterans and currently serving military members build homes from the ground up with the VA One-Time Close construction loan.
Our trademarked phrase, One and Won®, describes a single VA loan used to build your house and provide you with the mortgage once the construction is finished. One application, one loan approval, and one closing date. Other construction loans feature two applications, two loan approvals, and two closing dates, a more complicated process.
What is a VA One-Time Close Loan?
A VA One-Time Close loan, also known as a VA construction-to-permanent loan, allows qualified and fully eligible active duty, National Guard, Reservists, and veterans to use one loan to finance both the construction (including the land) and the mortgage at the same time.
You do not have to be a current landowner. If you own your land, lot equity can be rolled into the loan. If you have a lien against the land, it is paid off and rolled into the new loan.
If you do not own land yet, you can buy it under contract, and it will be paid off at the VA One-Time Close construction loan closing date.
What Does it Take to Qualify?
Active Duty servicemembers and veterans must meet basic income, credit, and property guidelines as defined by the VA or Lender:
- Verification of 2 years of consistent employment.
- A "middle FICO score" of 620 or better.
- Your debt-to-income ratio should not exceed 45%.
If your debt ratio is higher than 45%, you still have options to qualify for a VA home loan based on residual income (the money that is left over after you pay off all your monthly recurring debts).
VA Construction Loan Limits
There is no maximum VA loan limit for those with 100% of their VA loan entitlement. That means you have the potential to build a home above conforming loan limits in your county.
VA One-Time Close lenders typically offer up to $1,500,000 with full appraisals (which includes the VA funding fee being rolled into the loan). All borrowers must have good credit and qualify with the appropriate VA debt to income ratio for the newly constructed home.
Acceptable Property Types
Acceptable homes for VA One-Time Close construction loans include new construction, single-unit owner occupied primary residences. These homes may be stick-built or brick-built homes. They can be modular homes or multi-wide manufactured homes.
Unacceptable Property Types
- Kit Homes - Steel Homes in kits, Barndominiums, Log Cabin or Bamboo Homes
- Shipping Container Homes
- Dome Homes
- Bermed Earth Sheltered Homes
- Stilt Homes
- Solar (only) or Wind Powered (only) Homes
- Tiny Homes
- Carriage Houses
- Accessory Dwelling Units
- A-Framed Homes, and Shop Homes
- Duplexes, Triplexes or Fourplexes
- Investment Properties, Multi-Family, or Second Homes
- Self-Built Homes
Benefits of the VA One-Time Close Loan
With a VA One-Time Close Construction-to-Permanent Loan, eligible service members can take advantage of the VA construction loan which allows them to finance the construction, lot purchase, and permanent mortgage, all with a single loan.
- Zero Down Payment
Allowed up to 100% financing for the cost of both the land and construction and the VA funding fee may be financed into the loan. Zero out-of-pocket financing allows the Veteran to have a true $0 down loan. - No Mortgage Insurance
Eligible veterans do not pay mortgage insurance. - VA Funding Fee
For $0 down loans, the first-time use fee is 2.3% of the loan amount and for subsequent use, the fee is 3.6%. The funding fee can be rolled into the loan amount, and larger down payments allow for lower funding fee amounts. - One Closing Date
"One-time close" means the loan will close one time, reducing any double paperwork and closing costs. There is no requalification of credit of the veteran borrower or recertification of the property value upon completion of the home. - No Payments in the Construction Phase
Payments are not due during the construction period. Payments start when the home is completed. - 15-Year and 30-Year Fixed Term Options
These include interest rate protection during construction. The underwriting component of the VA Construction loan is no different than a VA purchase loan for an existing property except for a "Subject-To" appraisal and a few extra documents placed in the file.
The Project Starts When The Loan Is Approved
VA One-Time Close construction loans are 100% in place before any ground is broken. To protect all parties involved, the Builder is not paid for work not yet completed. During the construction phase, the lender utilizes inspectors to verify completed work and fully monitors all plans and payments to builders.
Use a VA Mortgage to Build a Home From the Ground Up
Most eligible veterans are familiar with the process of using their VA eligibility to purchase an existing home, yet they are not aware that they can use this same eligibility to build a newly constructed home from scratch.
Our network of specialized VA One-Time construction to permanent trained loan officers will fully explain all the details about the VA construction program to make sure this is the right loan for you.
Only a select few companies employ loan officers who fully understand VA One-Time Close loans and provide quality service throughout the process.
We are here to help those serious about building a newly constructed home, purchasing a lot, finding a local builder, and finding the right lender to put it all together.
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March 21, 2024Some construction loan terms are important to know before you commit to a One-Time Close loan. What do you need to know about this industry jargon. Some single-close loan terms are similar to others and can be initially confusing, especially when industry pros use some terms interchangeably.
March 18, 2024The banks that operate conventional construction loan programs have a variety of rules and requirements depending on who you use. Still, one thing among all these lenders is common--for conventional loans, it's the rules of the bank that apply in addition to state/federal regulations. These lenders do not have an overseeing federal agency that regulates the specifics of their construction loan programs outside of typical banking law.
March 8, 2024If you want to build a home from the ground up on your own lot using an FHA One-Time Close construction loan, you need to know some things before you start. According to Census Bureau data, the construction time for a single-family house is approximately seven months. This does not consider delays due to supply chain issues, weather or natural disasters, or cost overruns, but it’s a good benchmark to start with.
