If you are a first-time homebuyer and a veteran, the VA allows you to obtain a mortgage for new construction. However, many veterans are unaware that the VA does not provide the actual loan. Instead, the VA insures the loan with banks and mortgage lenders in the event you default on your mortgage. Therefore, you must find a lender who is willing to approve you for a construction loan.
A Closer Look at VA Construction Loans
The Department of Veterans Affairs states you can use a VA-backed construction loan to buy or build a home. You can also refinance a home using a construction loan. However, most lenders consider construction loans high risk since it does not convert to a permanent loan until construction is complete. The upfront construction …show more content…
Many lenders offer construction-to-permanent loans where you finance the cost to build with a developer or a homebuilder. Once the homebuilder completes the construction, you can roll the construction loan into a permanent mortgage backed by the VA. In this scenario, the skill of a qualified VA loan specialist comes in handy. If you cannot find a lender willing to offer you a construction loan backed by the VA, a loan specialist can.
The VA Construction Loan Process
Since you can use your VA entitlement for a construction loan, you must meet all the minimum eligibility requirements outlined by the Department of Veterans Affairs. You will need your certificate of eligibility from the VA and you must meet minimum property requirements set forth by the VA. You must meet the minimum credit score requirements, debt-to-income ratio requirements and the minimum down payment requirements set forth by the lender.
The VA does not have a minimum credit score requirement for qualified veterans. However, lenders want to see your credit score at 620 or better before they approve you for financing. The VA also uses a debt-to-income ratio of 41 percent as a benchmark, but lenders can use an overlay to allow for higher or lower DTI ratios based on their perception of your level of risk as a
A Closer Look at VA Construction Loans
The Department of Veterans Affairs states you can use a VA-backed construction loan to buy or build a home. You can also refinance a home using a construction loan. However, most lenders consider construction loans high risk since it does not convert to a permanent loan until construction is complete. The upfront construction …show more content…
Many lenders offer construction-to-permanent loans where you finance the cost to build with a developer or a homebuilder. Once the homebuilder completes the construction, you can roll the construction loan into a permanent mortgage backed by the VA. In this scenario, the skill of a qualified VA loan specialist comes in handy. If you cannot find a lender willing to offer you a construction loan backed by the VA, a loan specialist can.
The VA Construction Loan Process
Since you can use your VA entitlement for a construction loan, you must meet all the minimum eligibility requirements outlined by the Department of Veterans Affairs. You will need your certificate of eligibility from the VA and you must meet minimum property requirements set forth by the VA. You must meet the minimum credit score requirements, debt-to-income ratio requirements and the minimum down payment requirements set forth by the lender.
The VA does not have a minimum credit score requirement for qualified veterans. However, lenders want to see your credit score at 620 or better before they approve you for financing. The VA also uses a debt-to-income ratio of 41 percent as a benchmark, but lenders can use an overlay to allow for higher or lower DTI ratios based on their perception of your level of risk as a