If you are a veteran or military service member eligible for a VA loan, you can use that loan as a construction loan to purchase land and build a new home from the ground up. To understand more about a VA construction loan, let’s start here:

What Is A VA Construction Loan?

A VA construction loan is a short-term loan to cover the cost of building a home, similar to other kinds of construction loans. When purchasing a home with a VA loan, you borrow the amount needed to cover the home’s price and repay it with interest over a set term.  With a VA construction loan, you pay for the build through a series of funds “draws” as different parts of the construction process are completed; also, you can finance the land or lot purchase as well as the construction of the home, and in many cases, closings costs can be rolled in and financed.

There Are Two Main Types Of VA Construction Loans:

Construction-to-permanent or one-time/single close loan – With a construction-to-permanent loan, one loan covers the project’s cost and converts to a “regular” mortgage to repay what was borrowed. With this kind of arrangement, you only have to do the paperwork and pay for closing costs once.

Construction-only or two-time close loan – With a construction-only or two-time close loan, one loan pays for the construction, but once the project is complete, you will have to take out another loan to repay it. This means you go through two loan closings. In this scenario, you typically have to qualify for the second loan or take-out loan at the same time as the construction loan.

What Are The Requirements?

To qualify for a VA construction loan, there are several requirements you must meet; the first one is to get Pre-Approved other requirements are :

  • Certificate of eligibility – You will need a Certificate of Eligibility (COE) from the VA. You can file for this certificate online or submit VA Form 26-1880 to your local VA office.
  • Funding fee – While you don’t have to pay mortgage insurance for a VA loan, you are required to pay a funding fee. Funding fees are updated regularly based on your down payment and how many times you’ve used a VA loan.
  • Construction plans – You’ll need to submit your construction plans to the lender, including blueprints and the materials needed for the project, and get an appraisal to determine the value of the home you plan to build. Additionally, you’ll need a VA property certification before you can move forward.
  • Builder approval – In addition to using a VA-approved lender, you’ll also need to use an approved builder. Your builder needs to either already be registered with the VA or register and obtain approval from the VA.
  • Warranty – You’ll need at least a one-year warranty from the builder or an insured 10-year protection plan.

We know that this is a lot of information to take in. We encourage you to schedule a phone consultation with us, and we can talk about the different VA loan options that may work for you.

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