VA One-time Close Construction Loan Basics
– Provides construction financing, lot purchase, and permanent loan
– Single closing reduces closing costs and paperwork
– Permanent portion of the loan approved before construction begins
– Construction portion also underwritten and approved
– No payments due during construction
– No re-qualification once construction is complete
– 100% financing through VA (funding fee may be financed into the loan)
– Interest rate protected during construction
– 15 year and 30 year fixed term options
– 620 minimum qualifying credit score
– One unit stick-built house, new manufactured, multi-wide housing, modular homes
– Primary residence only
The single-closing program means one appraisal, one set of closing costs, one underwriting and qualifying process, which eliminates the time and expense of a second closing.
Who is eligible for a VA One-Time Close Construction Loan?
As with any VA loan the borrower must be a qualifying active duty member of the U.S. military, veteran, or surviving spouse. A Certificate of Eligibility (COE) is required. Other requirements of this program include:
– Borrower cannot perform any of the work
– Builder must provide a one-year VA Builder’s warranty
– General Contractor must be registered with the VA
– General Contractor must carry sufficient insurance through a current general insurance liability policy
– VA regulations require periodic inspections of properties under construction
– 620 minimum FICO score
Borrowers will also need to meet the income, asset, and minimum property standard requirements of VA loans. Eligible property types include the following, and must be the borrower’s primary residence:
– One-unit stick built house
– New manufactured double or triple wide housing (single wides are not allowed)
– Modular homes
Inspections are conducted during the construction process to ensure that all onsite and offsite improvements have been acceptably completed according to the construction exhibits on which the VA value estimate is based, and meet the VA Minimum Property Requirements (MPR’s).
In which scenarios is the VA One-Time Close Construction Loan useful?
After the housing market decline in the last decade, the way new construction loans are funded changed. Prior to the recession, builders were more able to access capital for new construction projects, and therefore funded much of the upfront production costs themselves. Today, many homeowners hoping to build a new home must obtain their own financing.
Building a Home with a VA One-time Close Construction Loan
The VA one-time close construction loan allows the veteran to lock in the interest rate at the time of approval before construction begins, and that rate is good until it converts to the permanent loan.
Not only is this loan program valuable for financing new construction on a traditional home for active duty, reservists, and veterans, but borrowers may also use the construction to permanent loan to finance Specialty Adaptive Housing construction projects as well. Military members with severe service-connected disabilities often need special adapted homes.
This one-time loan could be used to:
– Construct a specially adapted home on land to be acquired
– Build a home on land already owned if it is suitable for specially adapted housing
VA One-Time Close Construction Loan Refinancing
As the housing market continues to steady, veterans and active service personnel can take advantage of lower their interest rates through this program by refinancing in one of two ways. Homeowners who already have an existing VA home loan can reduce their monthly payments or shorten the term of their loans through a refinance VA loan program. Once the construction loan is converted to a permanent loan, and when interest rates lower, some homeowners may find it beneficial to refinance into another VA loan program to take advantage of lower interest rates and lower funding fees for some loans.
The VA One-Time Close Construction Loan Process
Here’s how our home loan process works:
– Complete our simple VA One-Time Close Construction Loan Qualifier
– Receive options based on your unique criteria and scenario
– Compare mortgage interest rates and terms
– Choose the mortgage loan offer that best fits your needs
– Let us connect you with an Elite Realtor to start the process towards building your perfect home