VA Home Loans for Home Construction: Factors to Consider

November 7, 2017 Posted by kyu7

Buying a home is perfectly fine, but one drawback is that the home has been lived in before. To some people, that takes away the feeling that the new home is theirs. But a construction loan makes it possible to have the ideal home built. For American veterans, VA home loan for home construction make it possible to build their own homes.

There are some clear advantages to constructing a home from scratch compared to occupying a pre-built home. The design opportunities are the most obvious to us all, but others relate to a more manageable repayment structure and the lower interest charged.

Financing home construction is a complicated process, but by speaking to the relevant people, and finding out the specific differences in loan distribution and payments that exist, the full advantages of a VA home loan can be enjoyed.

The VA Financing Option

Finding the funds to build a new home might be more complicated than looking for funds to buy an established house. This is because a VA home loan for home construction has more facets than a typical home loan, which is used to just buy the deeds to the home. A construction projects is a live thing, with delays and changes to design plans commonly experienced.

As a different loan animal, financing home construction is accomplished with different criteria, and even after the mortgage is approved, there are strict guidelines to take into account. Some of them work in the favor of the borrower, like the loan preventing borrowers from paying the construction fee, thus keeping the cost down.

However, in contrast, a funding fee is applicable, and needs to be paid just 15 days after the home purchase deal has been closed – though it can be paid before the deal is struck too. Some VA loan borrowers are exempt from the fees, such as wheelchair-bound veterans.

Advantages of Construction Loans

Normally, the advantages of getting a mortgage from the VA are that the interest rate is lower, with a percentage of the loan itself being subsidized by the government. Another is that once the loan is used to purchase the home, the borrower has 30 days before repayments begin. But it is different for a VA home loan for home construction.

Once the mortgage is approved and spent, it will take several months for the first repayment to be made. This is because financing home construction is very different to financing the purchase of a completely, pre-constructed home. The basic rule is that repayments should not begin until after the borrower has moved into the property.

So, if it takes 6 months to build the home, the borrower has 6 months to wait before repayments are made. There is a limit to this delay, however, with 12 months the maximum period of grace on the VA home loan.

Finding the Right Contractor

The process of finding a contractor to build your new home normally involves seeking a reputable builder in your area. But when getting VA home loans for home construction, it is important that only one of the registered contractors are hired to do the job. These builders must be recognized by the Department of Veteran Affairs, so look out for the VA builder ID number.

Even in general terms, financing home construction is a major deal. Budgetary concerns mean that quotes and rates have to be studied. While the VA might detail a short list of registered construction companies, it is still necessary to identify the one that works for the lowest cost.

Comments are closed.