The Veterans Affairs (VA) Home Loan is one of the most sought-after loans to build a home. While it offers numerous advantages, a VA construction loan can be filled with challenges, too. Moreover, the risk associated with new home constructions prevents VA lenders from providing the loan.
What is a VA Construction Loan?
A VA Construction Loan is a veteran mortgage loan intended to build or buy a home. The VA loan is a type of mortgage designed to be used in constructing a house for a veteran or for purchasing a home.
The VA construction loan is also known as a VA 203k Loan, allowing you to use the funds for more than just basic home construction. But this is where it gets tricky. VA regulations on loans are specific and restrictive, meaning that the lender can’t go beyond specific guidelines, such as the construction costs, before issuing the loan.
Who is Eligible?
The VA Loan is an option for both active military and veterans. If you are an active service member, you can apply for a construction loan. However, you must be on active duty and have served for at least 90 days.
You can also use the VA loan for single-family homes, condos, and manufactured homes. There are a few exceptions, such as you cannot make use of a VA loan for a property with a swimming pool that is not part of the property. You can also not use the VA loan for a mobile home, trailer, or any other type of RV.
Permanent VA Financing for Construction Loans
For a VA construction loan, the borrower will sign a promissory note and a mortgage which will go into foreclosure if and when the borrower fails to make payments on time. The lender will not issue an entire loan amount. Instead, the lender will only give a partial payment in a bridge loan. The bridge loan will cover the costs of constructing the home.
If you are looking to build a home, you will not be able to use the permanent financing on the construction loan until you are done with the construction. The lender will only give you a short-term loan to cover your construction expenses.
Additional Construction Loan Requirements
You can also use the VA loan for a property for which the VA loan can be used for purchase and construction. However, the lender must also use a VA-certified appraiser. The VA seller must also provide you with an eligibility certificate.
If you are building a home and want to use the VA loan, you may just want to wait until you move in because you get more benefits after two years of living in a property. The VA loan for construction is also for new homes only. You can not make use of a VA loan for a refinanced home.
Your VA Loan Specialist in Phoenix!
If you plan to use a VA loan to build a home or purchase a home and make use of the loan to build your dream home, you may have to wait until the construction is complete.
In the meantime, you can use the VA loan for your short-term financing needs, such as financing the cost of building materials, labor, and so on. With the correct amount of financial planning and research on your part, you will be able to take advantage of all the benefits the VA loan has to offer.
Desert Springs Mortgage is a full-service mortgage brokerage focusing on the purchase market through realtor partnerships and outstanding customer service in Arizona, California, Colorado, Oregon, and Washington. We offer conventional, FHA, VA, USDA, Foreign National, asset-based lending, HomePath, hard money, commercial lending, reverse mortgages, and many other various financing options. If you need a VA loan in Phoenix, AZ, call us today at (623) 432-1309!