If you are a veteran or have been a member of the armed forces for at least three months, you may be eligible to obtain a VA loan to buy a home. But are you aware that a VA loan can also be used to build a home? The goal of a VA loan is to help military personnel get into their own home with modest qualification requirements and little to no money down. That goal applies to both existing homes and new constructions. That being said, using a VA home loan for a new construction can be a little more involved than simply obtaining a mortgage. Let’s look at some things you might not know, but need to know, if you’re thinking to build a new home using a VA loan.
Loans to Build Are Different than Mortgage Loans
Mortgage loans only finance existing structures. If you are building a home from the ground up, you need to start with a construction loan. The VA does guarantee construction loans, but due to the increased risks involved at the beginning of a project, not every lender is willing to underwrite VA-backed construction loans. You can certainly find them, but it might take a bit of legwork. Once construction is complete, you’ll convert your construction loan into a standard VA loan. Lowder New Homes works with preferred lenders that are well-versed in the VA loan process for new construction homes.
In some cases (not all), you might find it easier to begin construction with a more conventional loan product. You might need to come up with a down payment to initiate this loan, but once the house is built, your lender can roll it over into a VA mortgage loan.
You Can’t Use a VA Loan to Buy Unimproved Land
Remember, the goal of a VA loan is to help veterans and active duty personnel obtain housing, not land for its own sake. Thus, you won’t be able to buy unimproved land with a VA loan with the intent of maybe building a home on it later. However, if you’re planning to build on a site, it stands to reason that your VA loan covers both the land and house that is being built on it. (This process, of course, starts with the construction loan mentioned earlier.)
You Must Work with a Licensed, Approved Builder
VA loans aren’t offered to “owner/builders,” which means you can’t use a VA loan to finance a house you build yourself, or a private builder you hire to do it for you. To qualify for VA-backed financing, you must work with a licensed, insured builder who can provide documentation that they are a registered, approved builder. While this rule may limit your own designs for building your dream home (for now), it does help ensure the home you end up will be up to code and meet standards of quality and safety.
For best results in building a new construction with a VA loan, look for a qualified builder who offers special programs and incentives for veterans and military personnel, especially one with experience with VA loans. Not only will this streamline the process, but it can also reduce your costs, putting more money in your pocket or helping you get more home for the money. To learn about our special packages for veterans and military in Montgomery, Alabama, call Lowder New Homes today at 334-270-6789.