Who Can Apply For A VA Construction Loan?
A VA One Time Close (OTC) Construction Loan (commonly referred to as VA Construction Loan) allows a potential borrower to buy land and pay home construction costs all with one single loan. This single loan replaces potentially three separate loans that may be required for you to build a home – Land loan, Construction loan, and the permanent financing you’d need after the home is complete (ex VA 30 yr Fixed mortgage). With a VA OTC Construction Loan, buyers can buy the land (or pay off an existing land loan), finance the construction costs in phases, and automatically convert to the permanent home loan mortgage at the end of the process. This cuts out any need for re-appraising or a second underwriting and closing process.
The VA Construction loan offers:
- Low VA fixed rates – locked prior to closing
- No mortgage payments while construction is ongoing
- 100% financing available
So who can qualify for this all-inclusive product? Minimum service requirements apply for Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves or National Guard members.
If a borrower is currently serving, eligibility is established after 90 days of continuous active duty.
Veterans are eligible if they served for time periods between 90 days to 6 years, depending on their service time period and classification. See below for some examples or check with your lender to confirm your eligibility with VA.
- 90 total days during World War II, Korean or Vietnam Wars
- 90 active duty days during the Gulf War
- 6 creditable years in the National Guard or Reserves.
- 181 days – 24 continuous months in other circumstances and time periods
For Gulf War veterans (those who have served August 2, 1990 to present day), two years suffices. 90 days may be enough in certain circumstances.
If a veteran was discharged as a result of a service-related disability, there are no particular minimum service requirements.
There are some eligible civilians. Military spouses who have not remarried are eligible if their spouse was a servicemember or veteran who:
- Died while in service
- Died from a service-connected disability
- Is missing in action or a prisoner of war
Even if their late spouse didn’t die due to any service-related reason, widows or widowers may also be eligible if they receive Dependency and Indemnity Compensation (DIC) benefits.
All borrowers who apply need to contact their lender to obtain a certificate of eligibility (COE) which formally establishes their eligibility. The COE will identify either the era when a borrower earned their entitlement or another cause that makes them qualify for a VA loan. To apply for the COE, veterans will typically need their DD214 discharge papers. Active-duty service members will need a Statement of Service signed by their personnel officer.
The VA OTC Construction loan has all the same below requirements the VA has for their loan program.
- Flexible Debt-to-income ratio criteria
- VA funding fee which ranges from 2.3% to 3.6% depending on the individual level of entitlement (can be rolled into loan)
The VA OTC Construction loan offered by HomeLander Mortgage does have a 620 minimum credit score to qualify though.
Only a VA-approved participating home loan lender can offer a VA OTC Construction loan. As with all VA mortgages, the rules are not the only guidelines which must be followed. State law, other lender standards, local building codes, and other requirements may also apply.
HomeLander Mortgage will be there every step of the way. Schedule a call to begin the process at www.homelandermortgage.com
