A house is so much more than just a place to come home to at night. It’s a place to spend time with loved ones, feel safe and escape the stresses of everyday life. Ultimately, every house should be a home, especially for our veterans.
For many, finding their dream house in the current market is not a possibility due to high mortgage rates—so instead, they’re taking their future into their own hands, and building it themselves. With the help of a US Department of Veterans Affairs (VA) home loan, creating the home of your dreams can be a possibility for yourself and your family.
The path to finding a perfect place to call your own isn’t always easy and this is especially true when it comes to VA construction loans. However, with enough diligence and the right supports, building a better future for your family is possible.
The benefits of VA Construction Loans
There are many ways to finance a home, such as an adjustable-rate mortgage loan, a fixed-rate mortgage loan, long-term financing, a construction-to-permanent loan, and construction financing. However, there are special loans available to service members and veterans looking to purchase, refinance, or build a home. Although many veterans know home loans are available to them, not everyone is aware that they can use their loan as a construction loan.
There are many benefits to building a home, including the fact that you can address any accessibility concerns that you may encounter.
One of the most important benefits of VA home loans is the fact that, depending on your lender, you could receive a no-down-payment loan, easing a financial burden that many of us face when looking for a home.
Another potential benefit of building a new home with a VA loan is the fact that qualified borrowers can turn short-term construction loans into permanent VA mortgages after the home building process.
If you don’t already own land for your property, you can often include this cost in your VA construction loan. For those who already own the land they wish to build, it may be possible to use your equity towards a down payment.
One resource that could help you in your home building journey is a Specially Adapted Housing (SAH) Grant, which you can receive in conjunction with your VA home loan. An SAH Grant ensures that every disabled veteran is living somewhere accessible, accommodating and barrier-free. If your home will require certain renovations or modifications, then the SAH Grant is a great resource to help you afford it.
The challenges of VA Construction Loans
The biggest challenge when it comes to taking full advantage of your VA home loan is finding the best lender for you and your family.
Many lenders consider construction loans to be a high-risk investment compared to traditional mortgages, and, unfortunately, very few are willing to offer a $0 down payment loan. However, it is still possible to find a VA construction loan that is flexible and accessible, even if it isn’t down payment free.
Another challenge associated with construction loans is the fact that they are short-term loans. All veterans and service members interested in this opportunity should consider this and start working out the permanent financing as quickly as possible.
Ultimately, these loans are not granted directly by the VA, but rather by private lenders. For this reason, when speaking to lenders, it’s important to remember that the terms they are discussing will not apply to every lender across the board, and it is not a “take it or leave it” situation.
Before applying, you will need to acquire your Certificate of Enrollment from the VA. If this is already in order, then it’s time for the most important step towards building your new home: finding the best lender.
Don’t be afraid to reach out to multiple lenders to discuss the terms they are offering, including down payment and closing cost estimates. Not every lender offering a VA construction loan is one and the same, so it pays to do your research and shop around. It’s also a good idea to thoroughly research every lender you speak to ensure they have a proven track record of helping, rather than harming, veterans in need of financial support.
A great place to start your search is with your own bank or credit union. If your own financial institution doesn’t seem well-equipped to support you, then another option is to speak to other VA home loan recipients, or any other community members you may know and trust.
If you already have a homebuilder selected, they may also be able to connect with you an outstanding lender.
Building your new home
Once you’ve found a lender you’re confident in, and a loan you can handle, you can begin to build. You won’t be able to build until funding is secured, and installments of money will be released as milestones are reached in the homebuilding process.
The VA has certain property requirements in place to ensure every borrower will have a safe home with considerable value to similar houses in the area. Additionally, it is important to note that, per VA regulations, your homebuilding process will involve regular inspections. These inspections will ensure that all local regulations and building codes are being followed, as well as that the criteria for the loan program are being respected.
Another option to consider is the opportunity to first take out a conventional home construction loan, rather than a VA loan. If you choose this option, your builder will be paid in installments, and once it’s complete, you can refinance your home into a VA Home Loan. In many circumstances, the VA will treat this as a new VA loan, rather than a refinance.
Ultimately, it is up to you to find a lender, and discuss with them the best route forward. As building a home is seen as a high-risk investment, there will likely be challenges along the way. But, if you are confident that building a new home is the right choice for your family, then the VA construction loan program offers a one-of-a-kind chance to make this happen.
With the right lender and homebuilder, some diligent research, and a loan with terms that works for you, something magical can be built: a place that you can call home.