FHA and VA loan applications are run through the LP/Loan Prospector aka Freddie Mae underwriting system that starts the creation of
Ginnie Mae GNMA government backed loan securities. We process and underwrite FHA and VA one time close construction loans in a very similar way. The differences with a VA loan of course is that a military veteran has an earned benefit from his/her service and that is documented with a certificate of eligibility and DD 214. The United States government created the rights for veterans through the G.I. Bill of rights and in this bill the VA allows for this guarantee that protects lenders in the event of default. A VA home loan guaranty means that a purchaser obtains a loan through a lender like Security America Mortgage. The VA then works with the lenders like Security America Mortgage to guarantee the loan. If the home owner defaults on the loan, VA will pay the debt to the lender. VA will guarantee up to 50 percent of a home loan up to $45,000. For loans between $45,000 and $144,000, the minimum guaranty amount is $22,500, with a maximum guaranty, of up to 40 percent of the loan up to $36,000, subject to the amount of entitlement a veteran has available.
The main difference between a FHA one time close construction loan and a
VA one time close construction loan is the benefit that allows a veteran to obtain 100% financing with zero money down.  A homebuyer looking for a FHA one time close construction loan might own their land and have a lot of equity in that land so that would help them actually help reduce the need for down payment. With both the FHA one time close construction loan and the VA one time close construction loan there is still similarities with the drawl schedule and builder approval and how there are not payments during the construction loan. During the construction loan for both a FHA one time close construction loan and the VA one time close construction loan they do not have payments during the construction phase and because of this there is a rate that is fixed that is given to protect all parties. If you are going to purchase a house right now you might lock a loan for 30 days because that is the time it will take to qualify. When you are going to build a home it can take six months. You cannot go out typically and get a six-month rate lock when buying a home because first of all nobody that is selling a home wants to wait six months while it’s under contract to sell it. But in any case the rate is going to be much higher for the more days you like it.Â
Right now mortgage rates are volatile because of the volatility in world markets. Rates can spike a little bit more up-and-down. But we all know mortgage rates will go up in the future because there is obvious inflation and short term rates are being lowered and the further said multiple times they do not how much more room on the downside. With all of this said buying a home is a great investment and if there is a big sellers market where it is very hard to get a contract on a home because of limited supply then there is a great opportunity to build the home of your dreams using a one time close construction loan.
If you’re a veteran then that’s great you can utilize your eligibility and earned entitlement for a
VA loan with no money down. A Veteran will typically need to put 20% down if buying the land before closing on the construction loan. If you are going to make a contract on a piece of land to build on then you need to take some precautions. If you want to have this land owned before your approval with us on a VA construction loan then you can close on that land as fast as you want. We don’t do the land loan but we do allow you to wrap your land and construction loan together for one closing. In this case you must have a flexible close date on land because your approval with us will depend upon having your builder approved, your approval and plans approved before closing on the land.  For example if you only have a contract to buy land for 30 days and you’re trying to close on the construction one time close at the same time you might run into problems. If you’re buying land and the seller is flexible then closing on your land and VA Construction Loan one time close is much easier.Â
Questions you must ask yourself when you are putting land under contract and expecting to get a one time close construction loan are questions such as do you have your builder and plans lined up and ready to go? Have we pre approved your loan preliminarily already? Are permits going to take extra time? Have you and your builder made a plan for understanding the fact that materials could spike up or even down during this phase? With a VA loan one time close construction loan and FHA one time close construction loan we actually have a contingency built in for this kind of situation and it will be refunded to you when the home is complete if there was any extra contingency.  It’s a great idea to utilize the FHA one time close construction loan and the VA one time close construction loan because you’re able to build a home and not be dependent on sellers and limited supply. Being able to build a home in this market is ideal especially with main stream financing that we are offering in the form of a VA loan one time close construction loan and FHA loan that is also one time close.
Many people are competing on purchase transactions and bidding on the same house and that can drive the price up. Also if you’re building a home you likely only paid a commission for help with the purchase of your land whereas if you were purchasing a home then typically there’s a range of commissions up to 6% for the buyers and sellers agent. As you know often when people purchase a home they end up remodeling it and spending a lot of extra money to get it how they want it. When you build your home you can make it exactly like you want it the first time around. You can also consider a lot of special things and upgrades if your budget allows. But be careful because your plans and the construction cost along with comparable properties in the area are factors in your appraisal. Your land value in building cost should be supported by some comparable properties in the vicinity. Our hope is that your appraisal will allow veterans 100% financing and perhaps closing cost rolled in if there’s enough room based on the appraised value and the loan amount.
It’s a great idea to utilize the FHA one time close construction loan and the VA one time close construction loan because you’re able to build a home and not be dependent on sellers and limited supply. Being able to build a home in this market is ideal especially with main stream financing that we are offering in the form of a VA loan one time close construction loan and FHA loan that is also one time close. Many people are competing on purchase transactions and bidding on the same house and that can drive the price up. Also if you’re building a home you likely only paid a commission for help with the purchase of your land whereas if you were purchasing a home then typically there’s a range of commissions up to 6% for the buyers and sellers agent. As you know often when people purchase a home they end up remodeling it and spending a lot of extra money to get it how they want it. When you build your home you can make it exactly like you want it the first time around. You can also consider a lot of special things and upgrades if your budget allows. But be careful because your plans and the construction cost along with comparable properties in the area are factors in your appraisal. Your land value in building cost should be supported by some comparable properties in the vicinity. If this is a real property then there is an understanding that there is a bigger range of distance as opposed to inner-city.
