As long as the appraised value covers the loan amount then there is a good chance that you won’t have to put anything down. Also, if you have land equity this will help even more. There are many factors that can affect the appraised value. Confirm there are comparables to support value with your builder and be careful with upgrades that raise your building costs but aren’t in other comparable homes.

You may need to make a down payment if you’re using remaining entitlement and your loan amount is over $144,000. This is because most VA construction loan lenders require that your entitlement, down payment, or a combination of both covers at least 25% of your total loan amount.

Choose a VA Construction Loan lender that not only knows the VA loan guidelines but also the VA Construction loan One time Close guidelines.

When you have obtained your certificate of eligibility, you can begin the loan application process. To do this, you must choose a VA construction loan lender. Your VA lender will assign you a VA loan officer that will be your primary contact during the loan application process. At Security America Mortgage, we have a team of experts ready to guide you through your loan application and simplify the process.

With a VA construction loan we lock in your rate for the time of construction and thereafter. Since it could take 3-12 months to build your home there is a chance that mortgage rate volatility could bring rates up during that period and you are protected from rising rates. After you live in the home for 6 months and make 6 months of payments you are also free to refinance with us if there is a tangible benefit to you.

Many non One time close loans and other traditional construction loans have a variable rate during construction and when you lock your permanent rate after construction, rates could be higher. A VA construction loan one time close rate is more than a typical 30 day purchase rate because the market volatility and risk are built into this fixed rate.

A VA loan doesn’t have mortgage insurance that is paid monthly. Instead, it has a more affordable version called the va funding fee. The VA funding fee is paid only once on a va loan. PMI is paid monthly, and the amount depends on the size of the loan, state of the market, and your financial history. For a conventional home loan, PMI ranges from 0.58% to 1.86% of the original loan amount per year.

The VA funding fee in 2022 is 2.3 percent when buying a home and using your VA entitlement for the first time. If your loan is still $200,000, that means your funding fee will equal about $4,600. That’s a one-time payment (unless you refinance) and considerably less than all your PMI payments combined on a comparable conventional loan. Considering these numbers, the VA funding fee is definitely less expensive than private mortgage insurance.

Also, if you have a service related disability then there is a chance you won’t have any funding fee. In fact, Veterans injured during service are exempt from paying the VA funding fee if they receive disability compensation or have a disability rating of 10% or higher. Surviving spouses of Veterans who died in the line of duty also qualify for a funding fee exemption. You may be eligible for a refund of the VA funding fee if you’re later awarded VA compensation for a service-connected disability.

The effective date of your VA compensation must be retroactive to before the date of your loan closing. If you think you’re eligible for a refund, please call your VA regional loan center at 877-827-3702. A subsequent use of your VA loan entitlement will bring the funding fee up to 3.6% if you are putting no money down or less than 5% down. The VA funding fee is completely tax deductible.

One of the most important aspects of the VA Construction loan is that you don’t have to requalify. In general the qualification standards of VA loans are less credit stringent than conventional loans.

A Veterans credit history over the last 2 years is more important than the distant past and oftentimes a Veteran with borderline credit around 640 has a better chance at a VA loan than a conventional loan. The VA itself doesn’t specify a minimum credit score. VA construction loan lenders will set their own credit score requirements. At 620 you have a better chance than 600 but less of a chance for approval than 640.

There are many factors at play such as how your credit has been over the last 2 years and your debt to income ratio. If your credit isn’t quite where it needs to be for approval then oftentimes you can make a few changes to get your score to where it needs to be to qualify.