How To Apply For A VA New Construction Loan
The VA new construction loan process tends to be complicated because not all lenders offer this kind of loan. Here’s the step-by-step process you’ll follow to apply for the VA construction loan program:
1. Acquire A Certificate Of Eligibility (COE)
VA loans and VA home building loans are only available to eligible active-duty service members and veterans, qualified reservists and National Guard personnel, and eligible surviving spouses. And to prove you meet these conditions, you’ll need to provide a Certificate of Eligibility, or COE.
Your COE proves that you meet the requirements to apply for your VA construction loan. You’re generally eligible for a COE if you’ve put in at least 90 days of active military service or completed 6 years of honorable service. Read about specific eligibility requirements to learn more.
2. Get Preapproved For A Loan
Next, you’ll need to get preapproved for the loan. You can do that through a bank or credit union. However, not all VA lenders provide VA construction loans, so you may have to ask additional questions during the preapproval process.
Preapproval is essential because it helps you get an idea of the type of house you can afford to build. It also shows your builder that you’re committed to seeing this process through.
3. Find A VA-Registered Builder
Once you’ve been preapproved for the loan, you can start looking for a VA-registered builder. The Veterans Information Portal is an excellent resource for you to use.
Any builder you use must be VA-registered in order for you to get approved for a VA construction loan. They’ll also have to submit their plans for the home and the materials they plan to use ahead of time.
4. Get The Property Appraised
The next step is hiring a VA home appraiser to evaluate the proposed plans. It’s a good idea to choose an appraiser who’s familiar with VA construction loan guidelines.
5. Close On The VA Construction Loan
Once your initial plans have been approved, it’s time to close on the VA construction loan. The entire process could take 45 to 60 days to complete.
Unlike a typical mortgage, you won’t receive the funds immediately upon closing. Instead, the funds will be dispersed based on the timeline of your project. The remainder is deposited into an escrow account to be withdrawn on an as-needed basis.
6. Pass VA Inspection
Once the home is built, you’ll need to complete an official VA inspection. Once your project is considered complete, what happens will depend on the way your loan is structured. Sometimes you can do construction-to-permanent financing and the loan becomes a permanent VA loan.
In other cases, you’ll need to pay off your construction loan. This is commonly handled by refinancing into a permanent traditional VA loan. Rocket Mortgage can help you with this.
