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Active Duty or Veteran Construction Loan

General Loan Program Requirements
VA is authorized to guarantee loans to eligible veterans to construct a residence to be owned and occupied by the veteran as a home. The loan may include simultaneous purchase of the land on which the residence is situated or will be situated.

To qualify for a VA loan, the law requires that you must be an eligible veteran who has available home loan entitlement; the loan must be for an eligible purpose; you must occupy or intend to occupy the property as your home within a reasonable period of time after closing the loan; you must have enough income to meet the new mortgage payments on the loan, cover the costs of owning a home, take care of other obligations and expenses, and still have enough income left over for family support (a spouse's income is considered in the same manner as the veteran's); and you must have a good credit record.

Loan Program Description
VA loan guaranties are made to servicemembers, veterans, reservists national guard and qualifying unmarried surviving spouses for the purchase of homes, condominiums and manufactured homes and for refinancing loans. VA guarantees part of the total loan, permitting the veteran purchaser to obtain a mortgage with a competitive interest rate, without a down payment. VA requires a down payment for a home or condominium when the purchase price exceeds the appraised reasonable value of the property or the loan has a graduated payment feature.

Loan Terms
A loan to finance the construction/purchase of a residence is closed prior to the start of construction with proceeds disbursed to cover the cost of, or balance owed on, the land, and the balance into escrow. The escrowed monies are paid out to the builder during construction.

A veteran begins making payments on a construction/permanent home loan only after construction is complete. So, if the home takes six months to complete construction, the payment schedule for the veteran obtaining a 30-year mortgage must provide for full repayment of the loan in 29 years and six months.

On a construction/permanent home loan, the builder is responsible for:

• interest payments during the construction period, and
• all fees normally paid by a builder who obtains an interim construction loan including, but not limited to:
• inspection fees
• commitment fees
• title update fees, and
• hazard insurance.

Loan Application Process
Contact a lender to discuss qualifying for a VA loan. The lender will make sure you meet basic program requirements, including the following:

• You must have enough income to meet your monthly mortgage payments, maintain the home, take care of other debts and obligations, and still have enough money left over to cover day to day expenses (food, gas, etc.).
• The loan must be for the home you will live in.
• You must also have a good credit history.
• The loan may be made at 90% of the appraised value of the home. (some refinance loans can be made for 100% to value they include: construction loans, installment land sale contracts, and loans assumed by veterans at interest rates higher than that for the proposed refinance)

Loan Managing Agency
U.S. Department of Veterans Affairs

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