5 Useful Tips When Applying For A VA Construction Loan
Have you served in the military and want to build a home? Do you need assistance financially to help your dreams of homeownership a reality? Lucky you, there are many financing options available that you can choose from.
However, do you know that there are loans in place specifically for individuals like you that have selflessly served your country? A VA construction loan is a specific type of home loan that you can consider. This content feature will shed light on what you need to know about this funding option and so on. Want to know different tips before applying for a VA construction loan? Keep on reading to learn more.
- Confirm Your Eligibility
Before applying to sites like securityamericamortgage.com, it’s best to confirm if you’re eligible for a VA construction loan. Knowing this beforehand will save you time.
To qualify, you need to be on active duty in the military and should’ve done at least 90 days of deployment. If you’re a veteran, you need to have served for a minimum of six years and must have left the service honorably.
If you’re a surviving spouse, on the other hand, you’re eligible if you haven’t remarried after the passing of your partner. The circumstance of the passing of your partner will play a key role in determining your eligibility.
- Know The Different Financing Options Available
A VA construction loan has several financing options.
One will cover the costs of purchasing land, constructing your home, and your mortgage. This is commonly known as a one-time closing, meaning one loan will cover the three.
The other will offer a short-term loan that’ll cover the land and construction process. After which, you’ll need to refinance and acquire another loan to cover the mortgage.
Meanwhile, some loans will cover the construction process only if you already have your land. You’ll then need to get another loan for the mortgage later.
Lenders like Security America Mortgage will advise you accordingly since terms will differ from one financer to the other. It’s also good to note there’s a minimum amount of VA loan you can get; research what applies in your state.
- Understand The Requirements
A VA construction loan has many requirements that you need to keep in mind.
As the borrower, you’ll need the following:
- Credit report: To qualify for a VA loan, you need to have a minimum credit score of 640. Major credit bureaus hand over free annual credit reports so that people will know their credit status. A credit report will contain different pieces of information like past bankruptcies and the like.
- Certificate Of Eligibility (COE): This document proves that you’re eligible for the VA loan. This can be obtained at your local Veterans Affairs office or online.
- Financial records: Keep your financial records in order and make sure that they’re readily accessible if your lender asks for them.
- Income: To get a loan, you need to prove that you have a stable income. It needs to be at least two years with one company if you're employed. If you’re self-employed, the lender might ask to see your tax returns over the past six months or so.
- Residual income: This is the amount of money you have left after paying your bills and utilities. It shows the lender your capability of paying up your loan.
Your property will need to meet the following requirements:
- It needs to be your home residence and not a rental investment. Construction costs may vary.
- You might be required to move in within six months of completion.
- You’re supposed to start building as soon as you purchase the land.
- There’s a limit to the number of acres you can purchase. This varies depending on the state and the land’s value in the said locality. Therefore, you need to do your research.
Further, the builder you’ll be partnering with will also need to follow certain conditions such as:
- They need to be involved with VA construction loans.
- They should have a license and general liability insurance.
- They must offer a warranty.
- They should have a minimum of two years of experience in construction.
- Familiarize Yourself With The Procedure
The VA loan application process will take approximately 45 to 60 days. The process will usually involve the following steps:
- Presenting your house plan, including its material specifications;
- Ensuring the land is appraised by a VA-approved valuer; and
- Having the house inspected after construction wraps up.
- Keep Tabs With Your Loan Payments And Rates
With a VA construction loan, you have to start paying it as soon as you’re done with the construction, and you should complete it within the agreed period.
Your repayment is subject to interest rates which will be higher than with a standard loan. The VA loan doesn’t require you to make a down payment or include collateral, hence the higher rates. Plus, your credit history and lending records will dictate your interest rates.
As seen, there’s a lot to learn regarding VA construction loans. This feature has covered the basics that you need to know. Knowing this will help you be prepared psychologically and ensure you get all your documents and meet all the requirements beforehand. The process will be smooth and fast with prior planning, eliminating hiccups. The pieces of information mentioned above put you in a better position to decide whether to take the VA construction loan or not.