VA One Time Close Construction Loan

John Thomas May 3, 2019 Tags: Delaware VA Loans, VA Loans

What is a VA One Time Close Construction Loan? If you’re a Veteran or have a loved one who has served as member of the Armed Forces, you’ll understand sacrifices such as being away from family, missing the birth of your child, experiencing battle trauma—or worse. Perhaps one common challenge faced by Veterans when you finally make it home is difficulty integrating back into civilian life.

Needless to say, you are our heroes and you deserve the best benefits. One such benefit relates to housing. It’s called the VA One-Time Close Construction Loan. Call 302-703-0727 to talk to a VA Lending Specialist about a VA Construction or get started online APPLY ONLINE

What is a VA One-Time Close Construction Loan?

First, let’s define “construction loan.” A construction loan is a short-term loan you take to finance the building of your home or another real estate project. Note that this type of loan is for when you are custom-building your home. You don’t take a construction loan if you’re purchasing an existing house that’s already built and standing. You’ll need a permanent mortgage for that.

Now if there’s a one-time close, there must also be a two-time close, right?

Correct. A standard construction loan is usually two-time close. This means you take a loan to cover the cost of the project. After the project is completed, you will need to take a second loan that will also serve as a standard mortgage which you’ll be paying over a number of years. Two-time close loans mean there are two start dates and two closing dates, which means two sets of closing costs.

Meanwhile, a one-time close loan eliminates paying two sets of closing costs, which may add up to anywhere between $3000 to $6000. Another advantage of a one-time close loan is you are aware of all the terms, unlike a two-time close where you may get one construction loan and then need to settle for a loan that you may not be comfortable with just to be able to pay off the construction loan. With a one-time close loan, you have more flexibility and freedom

The VA One-Time Close Construction Loan allows qualified borrowers to finance both the construction loan and the permanent loan (or the mortgage) at the same time. Veterans do not have to worry about qualifying for two home loans and the two closing dates.

The Greatest Advantage of a VA OTC Construction Loan? Zero Down Payment!

The advantage a VA One time Close Construction loan has compared to another type of loan, the FHA One-Time Close Construction Loan, is that VA counterpart is zero down payment. FHA loans are open to any financially qualified applicant but will require a down payment. For the qualified Veteran, there’s no need.

One Closing and one of qualification for land and construction
Zero Down payment required
No Monthly Mortgage Insurance Required
No Payments Until Construction is complete

Do you want to know if you’re eligible for this loan? Check your eligibility here.

VA One Time Close Construction Loan Terms and Conditions

Like most other VA home loans, VA one-time close construction loans require the borrower to occupy the home once it’s finished. The Veteran must also be the primary occupant of the home, with provisions being made for those who are called to active duty service, deployments and other types of military duty that requires the Veteran to be away

Another thing you must know, most VA loan transactions will require a VA loan funding fee. However, Veterans who are eligible to receive VA disability benefits may get the dual benefit of no down payment and no VA loan funding fee.

VA Construction Loan Basics:

Provides construction financing, lot purchase, and permanent loan
Single closing reduces closing costs and paperwork
Permanent portion of the VA loan approved before construction begins
Construction portion also underwritten and approved
No mortgage payments due during construction period
No re-qualification once construction is complete for VA Loan
100% financing through VA (funding fee may be financed into the loan)
Mortgage Interest rate protected during construction
15 year and 30 year fixed term options
620 minimum qualifying credit score
One unit stick-built house, new manufactured, multi-wide housing, modular homes
Primary residence only

Eligibility Requirements for VA Construction Loan

In order to qualify to be eligible for a VA Construction Loan, you must meet the requirements for a VA Home Loan which means you must be a qualifying active duty member of the U.S. Military, veteran, or surviving spouse. A Certificate of Eligibility (COE) is required. Other requirements of the VA Construction Loan include:

Borrower cannot perform any of the work
Builder must provide a one-year VA Builder’s warranty
General Contractor must be registered with the VA
General Contractor must carry sufficient insurance through a current general insurance liability policy
VA regulations require periodic inspections of properties under construction
620 minimum FICO score