The VA Construction Loan Timeline
July 19, 2024
VA One-Time Close construction loans help qualifying veterans build homes they will own and occupy once the construction phase is complete.
One-time close loans, or construction-to-permanent loans, combine construction and permanent financing into a single closing procedure. VA One-Time Close mortgages have no VA-required down payment making these loans attractive options for qualifying borrowers.
Doing so streamlines the process by establishing permanent financing terms upfront, which can be modified upon construction completion to convert to a mortgage loan.
The process avoids requiring the borrower to apply and qualify twice, once for the construction phase and once for the mortgage phase.
Owning Land
You don’t have to own property to apply for a VA construction loan. VA loan proceeds can cover land acquisition costs, with the remaining funds in an escrow account for the construction phase.
Escrowed funds are disbursed to the builder during construction as draws, according to the agreement the lender and borrower made for these payments.
Unique Rules
There are specific caveats in VA construction loan rules. One such requirement is that the VA Lender’s Handbook notes, “Once the VA construction loan type (one-time or two-time) is closed, it cannot be modified into another loan type.”
As mentioned above, the borrower has no VA-required downpayment, but many borrowers choose to make one anyway. Why? It provides an advantage. Paying 5% down or more lowers the amount of the VA loan funding fee, which is typically required in these transactions.
Borrowers also have no VA-required mortgage insurance.
VA.gov provides a general timeline for VA One-Time Close loans, which begins with the lender checking the borrower’s VA loan eligibility and concluding with the issuance of the loan:
General Timeline For VA One-Time Construction Loans
Once the borrower's eligibility for a VA construction loan is verified, the lender must:
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 who 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.
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.
One-time close loans, or construction-to-permanent loans, combine construction and permanent financing into a single closing procedure. VA One-Time Close mortgages have no VA-required down payment making these loans attractive options for qualifying borrowers.
Doing so streamlines the process by establishing permanent financing terms upfront, which can be modified upon construction completion to convert to a mortgage loan.
The process avoids requiring the borrower to apply and qualify twice, once for the construction phase and once for the mortgage phase.
Owning Land
You don’t have to own property to apply for a VA construction loan. VA loan proceeds can cover land acquisition costs, with the remaining funds in an escrow account for the construction phase.
Escrowed funds are disbursed to the builder during construction as draws, according to the agreement the lender and borrower made for these payments.
Unique Rules
There are specific caveats in VA construction loan rules. One such requirement is that the VA Lender’s Handbook notes, “Once the VA construction loan type (one-time or two-time) is closed, it cannot be modified into another loan type.”
As mentioned above, the borrower has no VA-required downpayment, but many borrowers choose to make one anyway. Why? It provides an advantage. Paying 5% down or more lowers the amount of the VA loan funding fee, which is typically required in these transactions.
Borrowers also have no VA-required mortgage insurance.
VA.gov provides a general timeline for VA One-Time Close loans, which begins with the lender checking the borrower’s VA loan eligibility and concluding with the issuance of the loan:
General Timeline For VA One-Time Construction Loans
Once the borrower's eligibility for a VA construction loan is verified, the lender must:
- Order the appraisal as a purchase, specify the loan used as “Construction to Permanent” and the building status as “Proposed,”
- Issue the Notice of Value following the appraisal
- Process the loan
- Close the loan
- Disburse funds to buy land where applicable
- Place loan funds in the construction escrow account.
- Submit the VA Loan Funding Fee within 15 days of loan closing.
- Disburse funds based on the draw schedule “after obtaining the Veteran’s written approval before making such a payment,” according to the VA.
- Review the final inspection report at the project’s end
- Modify the loan where applicable
- Issue the Loan Guaranty Certificate
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 who 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.
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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