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Lower VA Loan Funding Fees For One-Time Close Construction Loans


Lower VA Loan Funding Fees For One-Time Close Construction Loans
The Department of Veterans Affairs has announced changes to the VA loan funding fee, directly affecting those who want to build a home from the ground up using a VA One-Time Close construction loan. 

Lower VA loan funding fees scheduled to take effect starting April 7, 2023, make it more affordable to build a home.

The VA Loan Funding Fee

Congress made a funding fee associated with VA loans to reduce the taxpayer burden of the program. According to the VA official site, the fee helps lower the overall VA loan program cost to the government. The fee is charged when the borrower “does not meet the qualifications for a fee waiver,” such as receiving or being eligible for VA disability payments.

A reduced VA loan funding fee is offered in exchange for making a down payment.

The New VA Loan Funding Fee Structure

Lenders will accept a reduced funding fee when there is, “a 5 percent down payment without rounding to the nearest whole percentage. For purposes of calculating the funding fee, the percentage down is calculated as a percentage of the total purchase price or construction cost of the dwelling.”

Under the new guidelines, “Any amount paid by the borrower towards the purchase price, including cases where the purchase price exceeds the reasonable value established by VA, is included in the percentage down calculation.”

Best of all for those who want to build instead of buying new construction? Under the new program rules, and for construction loans only, “equity in the secured property may be used as a down payment for calculating the funding fee.”

The VA provides an example of a borrower using a One-Time Close construction loan.

The reasonable value in the VA.gov example is $400,000, and the example loan amount is $350,000. According to the VA, the purchase price “should be entered as $400,000 and the equity in the secured property, $50,000 ($400,000 - $350,000), should be entered as the down payment.”

The funding fee is automatically calculated, in this case it is $4,900 or 1.40%.

VA Loan Funding Fees for Loans Closing On or After April 7, 2023

Here are the revised VA Loan Funding Fees for VA Purchase or Construction Loans
:
  • First Time VA Loan Use, Down Payment Less than 5%: VA Loan Funding Fee= 2.15%
  • 5% Or More: VA Loan Funding Fee=1.5%
  • 10% Or More: VA Loan Funding Fee=1.25%
  • Subsequent Use With A Downpayment Less than 5%: VA Loan Funding Fee=3.3%
  • 5% Or More: VA Loan Funding Fee=1.5%
  • 10% Or More: VA Loan Funding Fee=1.25%
VA.gov advises that these reduced funding fees do not apply to refinance loans. 

Want More Information About One-Time Close Loans?

We have extensively researched the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.

We have spoken directly to licensed lenders that originate these residential loan types in most states, and each company has supplied us with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service.

If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially. 

OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher-quality service.

We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed. 

Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).

In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes. 

Contact Us:  Send Us Your Request – Spam Safe 

Please send your email request to [email protected], which authorizes OneTimeClose.com to share your personal information with one mortgage lender licensed in your area to contact you. 

1.  Send your first and last name, e-mail address, and contact telephone number.

2.  Tell us the city and state of the proposed property.

3.  Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product. 

4.  Are you or your spouse (Co-borrower) eligible veterans? If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.

Most VA lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
 
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