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VA Loan for construction? Various ???

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Re: VA Loan for construction? Various ???

There ARE lendors that will do VA construction loans.  There just aren't many.  

FBC Mortgage and Mortgages For America both do 100% VA Construction loans

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Message 11 of 14
Valued Member

Re: VA Loan for construction? Various ???

I am in the midst of this myself, and it's not for the faint of heart.  If you are cash strapped you might need to start saving now.  My scenario:

 

I am a 70% service connected veteran with a current VA mortgage. I own a house free and clear and have another house with a VA mortgage that I am in a very good equity position on. Both of those houses are listed for sale right now.

 

Purchase of land:  still being negotiated, but likely $205K  (67 acres<-- will have to subdivide)

 

Cost of construction of house:  ~ $265K using VA approved builder who is a friend of the family

 

Within a week my credit report will be updated as 100% debt free, and I make $75K/year in a very stable job.  No baddies on my credit.

 

The best TRUE VA construction to permanent (one closing)  loan we can arrange after 3-4 motnhs of working on it is:     $141K downpayment (30%) of total loan amount for land + completed house, leaving me with $15K in the bank from the proceeds of the sale of the other two houses.  Neither the bank nor the VA are excited about the amount of the reserves with that in the bank, even with good income,  extremely low DTI and current credit score of 728.   I have zero points, 3.5% interest rate, 30 yr fixed, monthly draws and a time limit for construction of 11 1/2 months.

 

You will run into a lot of banks that will tell you a VA construction loan is not possible.  It is, but start looking now.  I have found it is generally the national companies that do this rather than smaller regional banks.  Make sure they loan in your state.  There is a very large military population in the state we are building in, which helped.  Most of the VA CTP lenders (all 4 of them...LOL)  do offer loans here.

 

Another challenge we have run into is insurance. Insurance on a construction loan can be quite different, and some insurance companies have no interest at all in doing that.

 

I don't mean to discourage you, not at all.  The fact is that this is still the best type of mortgage out there.  It just will require some legwork and due diligence on your part, but it is completely worth it.  Make sure you have reasonable local comps:  buying 30 acres of land in a town and putting a 3,000 SQ FT house where tiny houses sit on 1/4 acre of land makes it very tough to get comps that will help determine the final appraised value. (A final appraised value took us close to 4 months to get because of the size of the land we are buying.)   You also need to allow time for some construction delays:  there is an inspection with every draw, and depending on whether or not there is a VA appraiser (or your bank can use their own) you may have a few days of complete inactivity while that's being arranged and done.

 

Since you are well ahead of time, start doing your research now.  Find a home plan you like and compare the sq footage to average homes in the area you want to build.  Start searching for your lender now...they can help you restore your VA entitlement if needed, and can also identify anything on your credit report that you need to start working on.  prepare yourself for a long journey with a ton of stress.  BUT a BIG BIG payoff in the end with the house of your dreams!!! Smiley Happy

 

I wish you luck...feel free to PM me if I can help or just offer words of encouragement!!

Message 12 of 14
Established Contributor

Re: VA Loan for construction? Various ???

You're essentially 4 months from your lease being up and hopefully you've secured a home with contract to build.  We're going through the process now, signed a contract 3 months ago and going VA.

My builder (Blanford Homes_AZ) said it should be completed in 5-6 months (Dec 2nd is completion date).  When we signed all we had to do was put down whatever we wanted which was $500, he said being that VA doesn't require down you can use it for DP or ask to get it back at closing as my builder is paying 2% of closing costs (2% of $252,000 is 5K and closing is less than that) and I got my realtor to pay 2% towards my VA funding fee of his 3% commission so I'm coming to the table w/ $0 and getting my $500 back and only have a pre-approval letter that was sent to builder to start as the pre-approval process I'm starting in 2 weeks (this will be good for 90 days).

 

In your case, you have no VA funding fee for being 100% disabled and depending on your market area could get builder to cover closing as well.  You should be able to pull off same scenario as me- wishing you the best on your journey!

" EX 698 EQ 701 TU 707 MMS 705"
Message 13 of 14
Established Contributor

Re: VA Loan for construction? Various ???

Unless you are getting seller paid closing costs you can count on about 3-5% of purchase price as needed for closing costs. You may not use it all but that is typically what they come in at.

Closing costs are the secret costs that add up, I guess not "secret" but not talked about as much as down payment is talked about. Even with zero down or 3.5 percent down there is still a chunk of change needed.

We did USDA zero down and our costs out of pocket were 500 appraisal, 500 earnest (different cost for building) 350.00 for home inspection.
Message 14 of 14
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