VA One Time Close Construction Loan

No money down. Finance your lot.

New home constructionConstruction loans can be a tricky business, especially if you're a veteran. Fortunately, there are VA one time close construction loans available that can help make the process a little easier. In this blog post, we'll explore what these loans are and how they can benefit you.

What is a VA one time close construction loan?

A VA one-time close construction loan, also known as a VA construction-to-permanent loan, allows qualifying active duty, National Guard, Reservists, and veterans to utilize a single loan to fund both the construction (including the land) and the mortgage.

There is no need to own the land that the home will be built on. If you own your land, you may roll the equity into the loan. If there is an existing lien on the property, it is paid off and rolled into the new loan.
You may purchase land and pay for home construction expenses with a VA One-Time Close construction loan.

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:

  • 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.
  • Minimum qualifying credit score of 620 or greater.
  • Your debt to income ratio should not exceed 45%.

If your debt-to-income ratio is more than 45%, you may still qualify for a VA mortgage based on your residual income (the money that is left over after you pay off all your monthly recurring debts).

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

There are a number of different property types that can be purchased with a VA one-time close construction loan program. Some of the most common include:

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

To be eligible for a VA one-time close construction loan, the property must be for your personal occupancy. This means that you must intend to live in the home as your primary residence, and you cannot have any plans to rent it out or use it as an investment property.

Loan Term

15 and 30 years

Loan Limits

For VA new construction mortgages, the vast majority of lenders use the county conforming loan limits. The current maximum loan amount in the majority of counties in the United States is $647,200. There is a possibility that a down payment will be required for loans with amounts that are larger 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 be wondering how the process works. A VA one time close construction loan allows borrowers to finance both the purchase of a property and the cost of construction 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. Normally, the procedure involves these eight steps:

Step 1. Request your Certificate of Eligibility (COE) online, or ask your loan officer to obtain the COE on your behalf.

Step 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.

Step 3. Choose your builder and verify that your builder is listed with the VA.

Step 4. Submit the building specifications and blueprints to the lender. The new house must adhere to the VA's minimal property standards. Your builder must submit Form 26-1852 (along with a duplicate of the construction designs) for approval, with a list of all the building supplies.

Step 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 about the determination and disbursement of draws to the builder. Some lenders determine draws using a line-item percentage of completion technique, while others may use a project percentage of completion method. Typically, payments are distributed based on finished work.

Step 6. Complete the loan closing. Your loan has now 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.

Step 7. Once the house is complete, the building must be inspected to ensure that it complies with local building codes and VA minimum property requirements (MPRs).

Step 8. Get ready for the permanent loan to start. When the house is declared complete, if you have a one-time construction loan, the permanent loan payment plan will immediately start. 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 one time construction loan?

Young family at closingThere are many benefits of a VA one time close construction loan. Perhaps the biggest benefit is that you only have to go through the qualification process once. With a traditional construction loan, you have to qualify for the loan, and then again when you refinance into a permanent mortgage. This can be a time-consuming and costly process.

Another big benefit is that you can lock in your interest rate upfront. With a traditional construction loan, your interest rate is not locked in until you refinance into a permanent mortgage. This means that if interest rates go up during the construction period, you will end up paying more than you would have if you had locked in your rate upfront. With a VA one time close construction loan, you can lock in your interest rate at the beginning, so you know exactly how much your monthly payments will be when your dream home is completed.

Perhaps the most important benefit of all is that you don’t have to make any payments during the construction phase. With a traditional construction loan, you are required to make interest payments on the loan during the construction period. This can put a strain on your finances, especially if you are also trying to save money for a down payment on the permanent mortgage. With a VA one time close construction loan, there are no payments due during the construction period, so you can focus on saving money for your down payment and closing costs.

Rotating question markFAQs 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. Read more about VA funding fees.

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

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

Q. What are the construction loan interest rates?

For any kind of mortgage that is guaranteed by the Department of Veterans Affairs, the VA interest rates, are determined by the lender. Borrowers should search around to discover the best interest rate, just as with any mortgage.


In conclusion, the VA one time close construction loan is a great option for eligible borrowers who are looking to build their dream home. The loan offers competitive interest rates, low closing costs, and the ability to roll all financing into one loan. If you are considering building your own home, be sure to speak with a loan officer about the VA one time close construction loan to see if it is the right fit for you.

VA One Time Close Construction Loan
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Recommended Reading

  1. Points on a VA Loan: What Are They and How Do They Work?
  2. Save Money on Your Mortgage by Amortizing Extra Payments
  3. How to use a VA Manufactured Home Loan Calculator