Are you a Veteran or otherwise qualifying service member or spouse that can qualify for a home loan from the US Department of Veteran Affairs? Do you want to build your own home instead of purchase an existing one? Then you may consider a VA Construction Loan. These loans come with many benefits and streamlined financing options for qualifying members or surviving spouses.
How do VA Construction Loans Work?
VA Construction loans help finance home construction on qualifying properties. They enable the borrower to finance the construction and permanent home loan into one mortgage. VA Loans often come with amazing benefits and low interest rates. Many can waive requirements to provide a down payment or secure private mortgage insurance.
Properties must be qualified to receive the VA Construction Loan. Your blueprints and home specifications must be reviewed. Here are some of the criteria to meet:
- Must have public street access and adequate space between buildings;
- Must be sanitary and have room for sleeping, dining, and living space;
- Must be a residential single family home, primarily;
- Must have adequate heating, lighting, mechanical systems, sewage disposal, and plumbing;
- Must have good roofing and systems to prevent moisture from getting into the home;
- Must be free of hazards and defective issues, including adequate and clear crawl spaces; and
- Must have access to drinkable water and water heating.
How Do I Get a VA Construction Loan?
Here is the rough VA procedure for securing a VA Construction Loan:
- Step 1: Obtain a Certificate of Eligibility from the VA
- Step 2: Ensure your debt-to-income and credit scores are managed
- Step 3: Find a VA Lender and get Pre-Approved
- Step 4: Find and qualify a property for the loan and locate a builder who can understand and meet the VA requirements
- Step 5: Work with the builder to coordinate and assemble all paperwork required
- Step 6: Go through the mortgage approval and underwriting process
- Step 7: Prepare for closing the loan and coordinate the close process for the loan
Do I Want to Use A VA Construction Loan if I am Eligible?
There are many pros and cons to using a VA Construction Loan. Speak to your lender and trusted advisors as you go through the process before committing to a long-term construction project. There are many benefits to this program, including the ability to finance the entire project with one closing and no down payment requirements. The interest rates are also usually very favorable.
On the flipside, the loan process can be long and cumbersome. It can sometimes be difficult to find a lender approved to make VA Construction Loans. You will also be required to pay an up-front funding fee. Ransom Kelly at Assurance Financial in Birmingham, Alabama is here to help with more information, contact our offices today about your VA Construction Loan needs.