VA One-Time Close Construction Loan

New home under constructionIf you are a veteran looking to build your dream home, you may qualify for a VA One-Time Closing Construction Loan. This loan option can offer significant benefits compared to a traditional construction loan or other financing alternatives. VA One-Time Closing Construction Loan is part of the VA construction loan program. It enables veterans to build a new home on their land or purchase an existing property without needing a down payment or monthly private mortgage insurance.

To be eligible for a VA One-Time Closing Construction Loan, you must meet the eligibility requirements for a VA loan, otherwise known as a VA purchase loan. This may include serving in the military for a certain amount of time, meeting minimum credit score requirements, and having sufficient income to qualify for the loan.

What sets VA One-Time Closing Construction Loan apart from other construction loans is that it streamlines the loan process. With a one-time close construction loan closing, you can consolidate two loans into one, eliminating the need for two closings and saving you from paying two sets of closing costs. Additionally, this type of loan allows for a single application process, saving you time and hassle.

If you are considering building your dream home or buying land to build on, a VA One-Time Closing Construction Loan may be the right choice for you. This loan program offers benefits that other financing options do not, such as no down payment requirement and no monthly mortgage insurance payments. Speak with a mortgage professional to learn more about the VA One-Time Closing Construction Loan program and its eligibility requirements.

What is a VA One-time Close Construction Loan?

Veterans and members of the armed forces may utilize a VA construction loan to build their own houses. This kind of loan, or a one-time closing loan, is intended to pay for the building expenditures associated with constructing a house. To cover construction expenses, the lender will provide the borrower with a VA home loan; after the house is finished, the loan will be converted into a permanent loan.

This implies that the borrower has to submit a single loan application rather than two separate ones for a house loan and a loan for a home building. Veterans must fulfill specified eligibility conditions and undergo the same procedure as other borrowers to be approved for a VA construction loan. After the loan has been accepted, the borrower may start building their new house and close the loan as soon as it is done.

Who is Eligible for a VA One-time Close Construction?

As with any VA loan, the borrower must be a member of the U.S. military on current service, a veteran, or a surviving spouse. Required is a Certificate of Eligibility (COE). Other qualifications for participation in this program include the following:

  • Active-Duty military personnel and veterans must fulfill the VA or lender's minimum income, credit, and property requirements.
  • Evidence of two years of continuous work.
  • The minimum qualifying credit score of 620 or greater.
  • Your debt-to-income ratio should be at most 45%.
  • Based on your residual income, you can still be eligible for a VA mortgage even if your debt-to-income ratio is higher than 45%. Residual income refers to the funds that remain after paying your monthly expenses.

Eligible Property Types for a VA One-Time Close Construction Loans

A VA one-time close construction loan program can purchase many different property types. Some of the most common include:

  • Single-family homes
  • Multi-family homes
  • Condos
  • Townhomes
  • Manufactured homes
  • Modular homes

The property must be for your use for a VA one-time close construction loan to be approved. You cannot use the house as an investment or rent it out, so you intend to live there as your primary residence.

Loan Term

15 and 30 years

Loan Limits

Most lenders use the county-conforming loan limits for VA new construction mortgages. The 2023 maximum loan amount in most counties in the United States is $726,200, and a down payment may be required for loans with amounts more significant than the county limit.

How Do VA New Construction Loans Work?

If you're a military borrower using your VA home loan benefits to build a home, you may wonder how the process works. A VA one-time close construction loan allows borrowers to finance both the purchase of a property and the construction cost in a single loan. That means no need to take out a separate construction loan and then refinance it into a permanent mortgage after the home is built.

Here's how it works:

With a few more obstacles, the application procedure for a VA construction loan is identical to that for a standard construction loan.

 Usually, the process involves these eight steps:

  1. Request your Certificate of Eligibility (COE) online, or ask your loan officer to obtain the COE on your behalf.
  2. Get pre-approved by a VA lender. You will provide the lender with pay stubs, bank statements, and all the typical documentation for loan approval. The pre-approval will establish the maximum loan amount that you are qualified for.
  3. Choose your builder and verify that your builder is listed with the VA
  4. Send the lender the building plans and specifications. The new home must meet the minimum property requirements set forth by the VA. 

    Your builder must submit Form 26-1852 (along with a copy of the construction plans). The builder must also include a list of all the building materials for approval.
  5. Provide the lender with the plans for the new home. Your builder must submit a breakdown of all expenditures associated with the building of your new house, with the total amount matching that on the Construction Contract.

    Your lender will often supply the cost breakdown form to be completed and will have particular criteria for the determination and disbursement of draws to the builder.

    Some lenders determine using a line-item percentage of completion technique. In contrast, others may use a project percentage of completion method. Typically, payments are distributed based on finished work.
  6. Complete the loan closing. Your loan has become a binding contract, so it's time to pay your closing fees, including the VA financing fee, and celebrate so that construction can begin.
  7. Once the house is complete, it must be inspected to ensure it complies with local building codes and VA minimum property requirements (MPRs).
  8. Get ready for the permanent loan to start. When the house is declared complete, the permanent loan payment plan will immediately begin if you have a one-time construction loan. The total loan sum will be used to determine the payment. You will swap out the construction loan for a new mortgage with a two-time closing.

What Are the Benefits of a VA One-time Construction Loan?

There are several advantages to a VA construction loan with a single closing. The most prominent benefit is that the certification procedure needs only be completed once.

With a conventional construction loan, you must qualify both for the loan and when you refinance into a permanent mortgage. This may be an expensive and time-consuming operation.
Another significant advantage is the ability to lock in your interest rate in advance. The interest rate on a conventional construction loan is fixed upon refinancing into a permanent mortgage. If interest rates rise during the building time, you will pay more than if you had secured your rate beforehand.

Locking in your interest rate in advance with a VA one-time close construction loan may make you sure of your monthly payments once your dream house is complete.
The most significant advantage is that no payments are required during construction.

You must make interest payments on a conventional construction loan during the building phase. This may strain your budget, mainly if you are simultaneously saving for the down payment on the permanent mortgage.

With a VA one-time close construction loan, no payments are required while the house is being built, allowing you to concentrate on saving for the down payment and closing fees.

FAQs About the VA One-Time Close Construction Loan

Q. Is mortgage insurance required for a VA construction loan?

A. Unlike FHA loans, mortgage insurance is not required for VA mortgages, including construction loans. However, the VA loan program requires a funding fee.

Q. When do mortgage payments for a VA construction loan begin?

A. Home loan payments begin after the home is built, and you should discuss your repayment terms directly with the lender.

Q. What are the construction loan interest rates?

A. The lender determines the VA interest rates for any mortgage the Department of Veterans Affairs guarantees. Borrowers should discover the best interest rate, just as with any mortgage.


If you're considering building the home of your dreams, the VA one-time close construction loan is a great option. The VA construction loan process is straightforward, and with the VA one-time close construction loan, you can roll all of your financings into one single-close construction loan. 

Qualifying for a VA construction loan is not difficult, but it is recommended that you consult with a knowledgeable loan officer who can help guide you through the VA one-time close construction loan process. To learn more about the VA one-time close loan and how it can help you achieve your homeownership dreams, consult a loan officer today.

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