Have you spent weeks searching for your dream home with a real estate agent but can’t seem to find the right fit? It is disheartening when you can’t find a home your partner and kids enjoy, especially in the middle of a military transition.
However, you don’t have to settle for less than you want as a veteran or active-duty serviceman or woman. The Department of Veteran Affairs (VA) offers construction loans to build the home you all have always wanted. You can settle down and relax in the freedom you’ve sacrificed for through homeownership.
There are seldom any VA new construction guidelines for 2022, so you can apply with a home loan expert as usual. They can walk you through the specific steps in the VA Loan Journey to secure you with a beautiful home construction project.
Below is more information on VA construction loans and guidelines so you can start over your residential life from the ground up.
What is a VA Construction Loan?
VA construction loans are short-term loans for qualifying veterans and active duty that cover building costs for a new home. You may already be interested in VA Home Loans because they’re filled with numerous financial benefits.
For example, they don’t require a down payment, don’t include private mortgage insurance, and don’t contain strict lending requirements. A lender won’t always ask you to pay the VA Funding Fee when building a home, and you can receive greater leniency with your credit score.
These niche construction loans provide more cost-effective mortgages than traditional options. In many cases, you can obtain single-close loans for the amount of the lot purchase, construction, and permanent mortgage payments.
This means locking in an interest rate will not be an issue for your family. You all can avoid 3 separate loan processes and combine them into one.
Although the paperwork can be more plentiful with VA Construction Loans, an experienced lender can take you through it step-by-step.
Who qualifies for a VA Construction Loan?
The requirements for obtaining a VA construction loan are very similar to the requirements for getting a VA home loan with an existing home. You must meet service eligibility, have a debt-to-income ratio of less than 41%, and provide a stable income. Also, lenders will ask for a credit score above 620 to protect them in case of default.
Only certain types of homes qualify for VA Construction Loans, which means your family may reevaluate what home you’re building. Mobile homes and manufactured homes are two residential properties that VA Construction loans do not cover.
Finally, Veterans Affairs must approve certain areas for new home construction to ensure you and your partner land in a quality part of town. They will mark off specific construction zones and prevent you from exceeding their maximum land limitations.
What are the steps for securing a VA Construction Loan?
1). Obtain Your Certificate of Eligibility (COE)
Having your COE in hand is the first step in securing any VA Loan. This certificate proves you meet the VA Home Loan service requirements through Veterans Affairs.
There are several ways to get this certificate, and the process is relatively easy. Your lender can obtain the COE on your half, or you can apply via the government’s online portal or the mail.
The VA Loan expert typically requires this proof before discussing a potential amortization calendar and monthly payments. So it is vital you submit the COE when you first begin with a home loaner.
2). Find a Mortgage Lender
This is the most challenging step when securing a VA Construction Loan since most lenders don’t offer them. They commit to more risk when funding new home construction vs. an existing home.
It’s impossible to find a willing lender, but it may take some more time and shopping around. However, a home building company or real estate agent can recommend a personable VA lender to assist your family.
3). Find a VA-Registered Builder
Not just any builder can build a home with a VA construction loan. VA home lenders want to ensure builders are reliable since there’s more risk involved.
Therefore, you must find a builder registered with the VA, or they need to seek a VA Builder ID number. They can complete the process within a week, but they cannot help you without finishing that first.
Both VA-Registered Builders and your experienced home lender will cooperate on building plans and materials. This teamwork will give you an accurate estimate of your mortgage and what you and your partner will pay.
4). Get an Appraisal
Before construction begins, your lender will require an appraisal based on building plans. This is to ensure that the home meet’s the fair market value.
You can only borrow what the home is worth, so selecting a fair and honest builder helps this step run smoother. Receiving an appraisal will set your family up for success at the loan’s closing.
5). Pass Final Inspection
The original appraiser will conduct a final inspection once construction is complete. They must ensure that the home meets the appraised value and the builder constructed the home according to the VA’s standards.
You and your family can enjoy the benefits of homeownership and relax in your brand new home after the final inspection. After the stress of building a new home and following property requirements, the VA Loan Journey ends here.
Can I still build if I don’t qualify for a VA Construction Loan?
Yes, you can still build a home if you don’t qualify for a VA Construction Loan. However, you won’t receive the same benefits that you would from a VA Home Loan.
Many active duty and retired veterans get other traditional construction loans and other types of loans for construction since they can’t find a willing lender. This situation is fairly common, and you still have the opportunity to refinance it as a VA Loan once construction is complete.
Assistance with VA Construction Loans
The process for securing a VA construction loan can be complicated and lengthy. There are many steps and qualifications to meet. Keeping track and ensuring that you don’t miss a step is vital but can be confusing.
But, you do not have to figure out the process on your own. Finding a VA Home Loan Specialist can make a huge difference.
We specialize in helping veterans obtain VA Loans for their primary residence and know all the steps required. Our team has experience helping service members secure VA construction loans, and we can help you as well.
Your country offers VA Construction Loans, and we want to help you enjoy the freedom you’ve sacrificed for.