VA New Construction Loan: Build Your Dream Home With One Closing
VA New Constructions Loans up to $4,000,000.What’s a VA New Construction Loan?
If you’re a Veteran or active duty you probably know whether you have your VA entitlement to use the VA financing or not, if not you can learn more here. If you have ever wanted to build a custom home
then we have a great one time close product. No down payment is required. If you own your lot already closing costs can be financed in as well up to 100% of the proposed value of the home. As always with VA financing you won’t have to pay private mortgage insurance as well. We can do VA jumbo mortgages for new construction up to $4,000,000!
On this page we won’t go over all the specific’s of our one time close new construction product, you can read more about that on that dedicated page. Here we go over some specifics relating to the VA new construction loan and how it differs from our regular conventional one time close construction product.
What is the minimum credit score requirements?
With a VA new construction loan you can actually go down to a 580 credit. However if your score is between a 580 and 640 I would highly recommend negotiating in builder concessions to help cover the cost of your interest rate to keep it in line with current average market rates.
When it comes to debt ratios the VA makes it really easy to stretch the numbers is you need to. As long as you meet residual income requirements we can get automated approvals up with debt up to 70-75% of your income. Keep in mind VA is all about residual income, meaning you have to have a certain amount of income left over for you and any dependents after your debt.
Payments during construction?
This is a big difference on VA new construction loans. The builder is required to make interest payments during construction. Additionally taxes, insurance and draw fees must be paid by the builder as well. The way our interest works on the one time close product is the payment is the same through out construction. Some loans require the payment to be made on what has been drawn, a little in the beginning and a lot later.
We take the full payment on the full loan amount and cut it in half, making the payment the same for the duration of construction. For VA this payment needs to be built into the contract. It can be a line item for the builder to include in his contract. We can help figure this out for you and the builder as we work to get project approval. Once again the Veteran will not be making any payments during construction.
Can I Use Any Builder?
Your builder must be a VA approved builder. This isn’t as big of a deal as it may sound. Really its just a matter of getting registered with the VA. They would need to fill out some forms and attest to being fair to clients more or less. The builder must provide you a fixed contract. It can not be a cost plus contract. We do however have a 5% contingency built into each VA new construction loan for overages that might occur during the max 11 month build time.
Do I need any money?
The short answer is a little. The automated underwriting system always likes reserves. The VA new construction loan does require a 5% contingency. So even though you can borrower up to 100% of the value, you need to make sure the value of the property plus the 5% contingency stays under appraised value. Or you will need to bring some cash to the table. You can finance closing costs if you have equity in the land you are building the home on as well! You can actually get away with just paying for an appraisal and project approval. Project approval costs about $300.
Any other VA perks?
The VA will allow you to build a pool, an accessory dwelling unit, or even a detached garage. If you’re interested in a barndominium that might even be possible if there are some comps in the area. Additionally modular homes are acceptable as well. Interest rates are always higher on new construction mortgages but using your entitlement on a VA mortgage or a VA jumbo mortgage will enable you to get a very competitive interest rate! Additionally if rates drop during construction your rate can float down!
Final thoughts on VA New construction loans:
If you’re a Veteran this a seriously great program to take advantage of. Any VA financing is great but if you want to build a home it doesn’t get easier. Its a huge advantage being able to finance up to 100% of the value of your new home. Additionally building in the interest payments for the construction period is great. You close on your loan and get to sit back and watch your home come to life, then your loan gets modified to permanent financing and you move in! Additionally, no second closing, no need to qualify again. Furthermore using an experience loan originator is key to a smooth experience! Reach out and let us know how we can help!
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Keith Meredith
Feel free to call or text message me directly at +1 (352) 615-1613 with any questions on any loan programs, credit score requirements or interest rates. 
