How to Build a House With VA Financing


It is possible to build a house using VA financing if you are an eligible veteran of the United States Armed Forces. A VA, or Veterans Affairs, loan is one with lower interest rates and easier qualifications aimed at veterans. VA financing for a construction loan is similar to other forms, however the VA provides a guarantee to the lender. Should the homeowner default on the home loan, the VA will offer compensation to the lender to cover the loss of profit. To build a house using VA financing, a few steps happen first.

Determine eligibility for VA financing by contacting your local VA officer and requesting a VA Eligibility Certificate. To be eligible, veterans must have served the proper amount of time in the Armed Forces, based on when you served. Visit the VA's eligibility rules website to learn specific requirements (See Resources).

Find a mortgage lender who offers VA-guaranteed construction loans. The VA approves lenders to provide these loans. However, veterans should contact the lenders directly and inquire about VA financing options available through the lender. The VA does not take applications directly.

Meet the credit and income requirements of the lender. Those eligible for a VA loan will likely have reduced requirements. Lenders set their own requirements for borrowers. If the lender approves the application, you have pre-approval for the loan.

Hire a builder that the mortgage lender approves of and begin to develop the plans for the home. Construction loans require that the builder and the lender work together to set up a payment plan. The payments made to the builder from the lender have a basis on the appraised value of the property throughout the construction process. The builder must meet these requirements to receive additional funding.

Monitor the building process. Most lenders do not require borrowers to start making payments on the home until the home is complete. The exact details of the contract with the builders and the lenders may be unique and therefore homeowners need to understand it fully.

Sign loan papers after the home has meet with all of the requirements of the lender and the builder has completed the process. The VA financing is in place at this time, though the borrower will make loan payments directly to the lender, not to the VA.

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