Usaa Va Construction Loan – A VA secured loan can be used to purchase land and finance the construction of your new home, but there are a few hurdles to clear. (Seth Perlman/AP)
One frequently asked question about the VA home loan process skips the “homes” part entirely: Can veterans take advantage of the land purchase benefit?
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VA backed loans are designed solely to help a veteran purchase a primary residence, so if there is no residence, there is no loan. However, an eligible veteran can apply for what the VA calls a “construction/permanent home loan,” which includes money to buy land in addition to financing the construction of a new home.
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Two takeaways for borrowers: First, the land and home are a bundle if the VA is expected to play any role in the loan. Veterans may have other options for purchasing land depending on their status; For example, Texas offers a Veterans Land Loan Program through its Veterans Land Loan Program.
VA-backed loans can be used for new construction, but many lenders don’t offer that option. (Mel Evans/AP)
Second, just because the VA approves the loan doesn’t mean the lender will offer it. Many reputable lenders do not provide these types of loans for various reasons, including the risks associated with construction. One option for borrowers would be to alternatively finance the construction phase of the home and then refinance with VA support after the residence is completed.
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Edited by Jeff Ostrowski Edited by Jeff Ostrowski Right Arrow Senior Mortgage Reporter Jeff Ostrowski covers mortgages and the real estate market. Before joining in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. Connect with Jeff Ostrowski on Twitter Twitter Connect with Jeff Ostrowski on LinkedIn Linkedin Jeff Ostrowski
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A VA loan—guaranteed by the Department of Veterans Affairs (VA)—is often used to purchase a home. However, this type of mortgage can also be used as a construction loan for veterans who are building or renovating a home. However, not all VA lenders offer construction loans, and if you do find one that does, the process of getting a VA home construction loan involves a lot of paperwork. Here’s what you can expect.
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If you are a veteran or military service member who is eligible for a VA loan, you can use this loan as a construction loan to purchase land and build a new home from the ground up. Alternatively, you can use the loan to buy an existing house and modify it according to your idea.
Veterans and service members who meet minimum service requirements (more on that below) can qualify for a VA home construction loan with a credit score of up to 640 and a higher debt level than is allowed for a regular home construction loan.
Many are also exempt from paying the VA financing fee, a typical requirement for VA loans, according to Jerry Thomas, a construction loan officer who specializes in VA and FHA loans at Cranbrook Loans in Clinton Township, Michigan. For example, it says, “Vets collecting VA disability income are exempt from reimbursement.”
Unlike a VA home loan, but similar to other construction loans, a VA land and construction loan is disbursed in installments as various key projects are completed. Funds are paid into a giro account that is paid to the builder during construction. Requirements can vary from lender to lender, but usually the lender will get the borrower’s approval after the construction phases are complete, after which the next payment will be released to the builder.
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The VA does not support loans – whether for new home purchase or construction – to anyone. You must meet specific requirements regarding your service. They differ depending on when you served.
If you are on active duty, you are eligible for a VA home construction loan as soon as you reach 90 days of continuous duty.
If you are a veteran who served between 1990 and today, you can meet these eligibility requirements in one of the following ways:
If you served decades ago, visit the VA Eligibility page to find the category that applies to you. Your minimum service requirement will be listed in the appropriate drop-down list.
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The good news: If you qualify, relatively new guidelines mean you won’t be subject to any restrictions on VA construction loans.
The first step in securing a VA construction loan is obtaining a Certificate of Eligibility (COE). This proves that you have met the minimum service requirements to qualify for a VA loan.
You can apply for a COE online through the VA eBenefits portal. If you are a veteran, you will need discharge papers DD214. If you are an active member, you will need a declaration of duty signed by your HR.
VA does not lend money directly; instead, you apply through a bank, credit union, or other lender that offers VA loans. Keep in mind that it can be difficult to find a lender that will approve a VA construction loan, even if it is a VA
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