As VA loan experts, we take pride in offering VA loans that help make life easier for veterans. Military life can be challenging, requiring frequent relocation that can cause stress in veterans’ families.
Military families can build their dream home utilizing their VA loan eligibility and our VA construction loan one time close program. VA loans have relaxed credit standards, do not require a down payment, and can help to simplify the construction loan process.
Our experts at Security America Mortgage are always happy to help with a personalized and hands-on approach to helping veterans access the best deal and best service!
A VA construction loan is designed to help veterans build their own homes and that’s especially handy when there is a limited supply of homes on the market. Currently the VA construction loan that we offer is only for a 30 year term. However, you can always refinance into a 15 year loan in the future after 6 months of payments as long as there is a net tangible benefit for you. Veterans can use the VA construction loan to construct on land they already own, or you can finance the cost of purchasing land with a construction loan.
The cost of building a home and the land can be financed in a one time close VA construction loan. A VA Construction loan can be a wise way to utilize the rightfully earned VA loan benefit. Building your own home might be better than buying one already built especially if demand is high in the housing market. VA construction loans are available with a 0% down payment and competitive interest rates. The appraised value must be greater than the loan amount needed to get 100% financing.
The VA construction loan can fund the construction of modular homes, site-built homes, and manufactured homes. The VA construction loan is completely different from a traditional construction loan. Traditional construction loans are usually two closings with a construction phase and permanent phase. Oftentimes the construction phase has a variable rate and you can’t get a fixed rate until the home is built and the second closing.
Many factors go into the timing of the process. If you have land, an approved builder, approved plans and were pre approved in advance the process could take under 30 days. If you are pre approved but don’t have your site, builder or plans then this process will depend on you. Delays in the process can occur when you don’t have an approved builder. Not all builders are approved with the VA and us so make sure you do that up front. If you don’t own your land yet but plan on putting it under contract then make sure the seller is flexible on the closing date or allow yourself 90 days so that you can make sure you have your builder and plans approved.
The VA construction loan comes with lenient credit requirements, making the loan more accessible to veterans with lower credit scores.
The VA construction loan requirements are as follows:
There are many benefits to using a VA construction loan over a traditional construction loan. These benefits are applicable to all kinds of VA loans compared with a traditional mortgage and refinancing loans.
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.
When purchasing a home you can get up to a 4% seller contribution on your closing costs from the seller. Reasonable and customary loan costs on VA home loans can be covered too. Total contributions may exceed 4% because standard closing costs do not count toward the total. With a VA construction loan there is no seller so the above doesn’t apply. However, we can work with your builder to see if Builder credits can serve a similar purpose.
The VA construction loan process can be pretty challenging to take on alone. Luckily, our experts at Security America Mortgage take a hands-on approach to the loan process and can guide you through each step of the VA construction loan process.
The first step in your VA loan application is to obtain a certificate of eligibility. Security America Mortgage is happy to help you get your certificate of eligibility. Simply fill out the easy application form on our website. We have access to the LGY system, meaning we can help you get your certificate of eligibility in a matter of seconds.
When completing the application form, you may need to provide some extra documentation as evidence of your service. You will generally need to provide a statement of service and a DD form 214. A DD form 214 is a certificate of release or discharge from active duty, and a statement of service is a letter from your commanding officer denoting the extent of your service.
To obtain your certificate of eligibility and access VA loan benefits, there are specific eligibility requirements you must meet. The following should apply:
If these standards apply to you, you should have no trouble obtaining your certificate of eligibility.
When you have obtained your certificate of eligibility, you can begin the loan application process. To do this, you must choose a VA 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.
Start our smart loan application here at https://jasonnoble.floify.com/ Jason Noble of Security America Mortgage specializes in VA loans and the VA construction loan. It’s important that we pre-approve you first.
Once we have pre qualified you then you should find a builder that is approved with the VA. Also, we will provide a packet that will approve your builder with us. We have this extra layer of protection to protect everyone’s best interest. If you already have a builder in mind, you can contact your VA loan officer at Security America Mortgage, and we can help you get them registered with the VA and us. The general contractor/builder must carry sufficient insurance through a current general insurance policy. Also, there will be inspections of the property during construction per VA regulations and guidelines.
Also, you can use the helpful VA-approved builders’ map on our website to find a builder in your area. The Department of Veterans Affairs website has tools to help you find a VA registered builder and determine if a builder is VA approved. Please note Security America Mortgage may not approve some VA registered builders, so be sure to check they are approved with us before enlisting their services.
Decide what land you want to build on and if you want it to be a part of your VA construction loan closing or if you will have your land before then.
If you already own your land then you make the process a little easier. If you don’t own your land yet then it’s important that you either close on it in advance or make sure that there is plenty of time to have your builder and plans approved before the closing date.
A property appraisal is required in the VA construction loan process. The property appraisal process is designed to ensure that you are not being overcharged for the home’s construction and gives the lender an estimate for the home’s value once construction is complete. The property appraisal will also determine if the house meets the VAs minimum home requirements.
Underwriting and approval of the permanent loan is done before construction begins! There will be an administration fee built into your closing costs that covers construction payments during the construction of your home. This means that you don’t have any out of payment costs during construction. Your first mortgage payment won’t be due until you are living in your new home! After all conditions have been cleared, closing and construction can begin! A 5% contingency will be built into the contract price to protect all parties from potential rising costs of materials but this doesn’t apply to manufactured homes. If the contingency isn’t needed then you’ll receive a credit and won’t lose that money!
Once construction on the property is complete, there will need to be a final inspection to ensure the funds from the VA construction loan have been used in line with VA guidelines and ensure the home meets the minimum housing requirements. Once the final inspection is complete, you will be able to make plans to move into your new home, and you can start making repayments.
Do you want to build your own home but are worried about the upfront costs? Don’t worry; there is no down payment required with a VA construction loan. You can build your dream home without facing hefty upfront costs and you might not need a down payment. At Security America Mortgage, we understand that there is a high demand for housing, and we want to make it easier for veterans to build their own homes and access housing despite the lack of supply. You can even finance the purchase of land with a VA construction loan!
To make use of your VA construction loan benefits, you will need to enlist the services of a VA construction loan lender. At Security America Mortgage, our experts are on hand to guide you through the loan process with a friendly and personalized approach. The VA construction loan process doesn’t have to be stressful.
To get your VA construction loan application started, simply use our certificate of eligibility application form. We can get your certificate of eligibility in seconds, thanks to our access to the LGY system. Once you have your certificate of eligibility, you can move forward with your application, which is easier with our supportive team’s help.
Security America Mortgage is an experienced VA lender who can help you build your own home without fuss or stress. We take pride in offering our services to make VA loans more accessible to veterans, in thanks for their service. Our competitive interest rates and no down payment loans can help you to build the home of your dreams without worrying about upfront costs.