For so many veterans and service members, home ownership represents the cornerstone of what it means to have a home, beyond just a place to live, but a place to serve, as well as a place to raise a family,” Hastings said. Although traditional VA loans make buying an existing home more accessible for veterans, what about VA construction loans to build your dream home from the ground up? Enter the VA One-Time Close Construction Loan. This is where you can have it all with a VA home loan for the construction of a new home with the ease of permanent financing as well as the ease of a one-time close.
Our comprehensive guide includes all the things veterans should know about the VA One-Time Close Construction Loan like eligibility, benefits, requirements and how it works step-by-step.
What is a VA One-Time Close Construction Loan?
The VA One-Time Close Construction Loan (also known as the VA construction-to-permanent loan program) is a special type of loan for military veterans and military families that would like to build a new home and take out financing for the entire duration of their mortgage in one single loan.
Rather than searching for another short-term construction loan, and then dismissing it for part two of the project, when you’re ready to toss your blueprints out the window and move in, this one lump both parts together. That translates to fewer fees, less paperwork and a more seamless experience.
Key Benefits of the VA One-Time Close Loan
This loan type offers several special benefits tailored to veterans:
1. No Down Payment Required
Like with traditional VA loans, the One-Time Close VA loan typically does not require a down payment, which makes it one of the least expensive ways to build a home.
2. No Private Mortgage Insurance (PMI)
Unlike with traditional or FHA construction loans, VA loans don’t require PMI, which can save you hundreds of dollars every month.
3. Single Closing
Rather than having two separate closings (for the construction financing and the permanent mortgage), the construction loan will slide right into a permanent mortgage once the home is complete – saving you time, hassle and money.
4. Competitive Interest Rates
There are usually lower VA loan rates versus other loan types and the One-Time Close loan locks in your rate even before construction begins.
5. Flexible Property Types
Veterans can obtain this loan to construct a single-family home, a modular home and in some cases a home with a modular home, if the lender permits.
6. Government Backing
Since the VA insures a portion of the loan, lenders are able to offer more favorable terms and have more lenient credit standards.
Eligibility for the VA One-Time Close Construction Loan
To be eligible, veterans and service members need to meet VA’s general eligibility requirements. On your own: You’ll need a Certificate of Eligibility (COE) to prove your entitlement. You may qualify if you are:
- An active-duty member of the military with 90 days or more of consecutive service.
- A service member who has served “the minimum amount of time as specified by law during a period of war or an otherwise wartime period or in peacetime.”
- A National Guard or Reserve member with enough active service, or at least six years of service.
- A widow (non-remarried) of a deceased veteran who was killed in action or who died from a service-connected cause.
Also, there may be requirements of lenders as well, such as:
- Minimum credit scores 620 (though it can vary by bank).
- Stable income and employment history.
- Both the back-end and front-end debt-to-income (DTI) ratios limit (back-end usually applies at less than about 41%).
How the VA One-Time Close Loan Works
A step-by-step guide to how the process works:
1. Pre-Qualification and Pre-Approval
The first is to be pre-qualified through a VA-approved lender. This can help how much house I can afford based on income and credit and finally and for how much house can i get that is refinance mortgage rates.
2. Find a VA-Approved Builder
Not every builder is eligible. The VA mandates that builders be licensed, insured and registered with the VA. Your lender can assist you with this.
3. Submit Plans and Specs
The VA will have to sign off on the construction plans and specifications to ensure that the property meets its standards for safety, habitability and worth.
4. Appraisal and Loan Approval
The home’s value based on the plans is estimated by a VA appraiser. If all is well, the loan is approved, and you’re ready to move to closing.
5. One-Time Closing
At the closing, you are going to sign some, but not all, of the necessary documents, and money for the construction is going to be deposited into an escrow account. Here’s where the “one-time close” benefit comes in, you do this once.
6. Construction Phase
Funds are disbursed during construction in stages (referred to as draws) to compensate the builder as it progresses through the project. The lender will inspect the work to ensure that it is done according to VA standards.
7. Transition to Permanent Loan
When construction is finished, the loan is automatically converted into a permanent VA loan with no second closing costs, and no additional closing fees.
What Can You Build with a VA One-Time Close Loan?
The VA has rules about what you can build with this loan:
- Single-Family Homes – The most common use, including custom-built houses.
- Modular Homes – Built in sections at a factory and assembled on-site.
- Manufactured Homes – Allowed if they are permanently affixed to the property (rules vary by lender).
- No Investment or Vacation Properties – The home must be your primary residence.
Credit and Financial Requirements
While VA loans are more flexible than other loans, lenders do set standards on credit scores and income levels. Here’s what most look for:
- Credit Score: About 620 and above, though some lenders may be willing to dip other.
- Debt to Income Ratio: Limited to 41%, unless you have strong compensating factors.
- Residual Income: One of the more uncommon VA guidelines that makes sure you have money left over after paying for your major expenses.
Pros and Cons of the VA One-Time Close Loan
As with all loan products, there are pros and cons.
Pros:
- No down payment or PMI.
- One closing overall saves time and money.
- You’re locking in those interest rates, so you’re immune to market fluctuations.
- VA-backed, which makes it a safer option for lenders and more available for borrowers.
Cons:
- Restricted availability through lenders (this program isn’t available through every lender).
- Tougher regulations on builders and construction designs.
- May take longer than purchasing an existing home.
- There may still be some closing costs involved, although in most cases, they will be lower than they would be with two closings.
Tips for Veterans Considering a VA One-Time Close Loan
- Choose the Right Lender – Not all VA lenders offer construction loans. Look for one experienced with VA One-Time Close programs.
- Vet Your Builder – Make sure they’re VA-approved and have a strong track record.
- Plan for Delays – Construction can take longer than expected, so prepare accordingly.
- Budget Carefully – Even with no down payment, you’ll need funds for closing costs, inspections, and possible upgrades.
- Get Pre-Approved Early – This ensures you know your budget before designing your home.
Why the VA One-Time Close Loan is a Game-Changer
For some veterans a house is the goal while a Dream House is the ideal; something the VA One-Time Close Loan can make thus providing a powerful option for building a custom home. It streamlines the financing process, saves money and takes the stress out of juggling two loans. And, most importantly, it allows service members and their families to experience the stability and pride of home ownership without settling for a generic, one-size-fits-all house.
Final Thoughts
The VA One-Time Close Construction Loan is more than a standard home loan; it’s a chance for veterans to put their construction plans into action without the stress and cost of taking out three loans to cover the three different phases of their project. Roll both construction and permanent financing into a single package and eliminate the stress of having two loans We’ve been financing for over 40 years, so we know you want a VA construction loan with an easy and efficient process, so we’ve simplified it and added the perks such as working one-on-one with a VA construction loan specialist, who will cover all your needs.
If you’re a veteran, but you’re dreaming of making your own home a reality, it may be worth looking into this with a trusted VA-approved lender. With some careful planning, the correct team, and the benefits you’ve earned through service, you may be closer to your dream home than you think.