The VA Construction Loan Explained

A VA construction loan guaranty can help you secure financing to make repairs or improvements to your property. This program is only available to members of the armed forces, either active or veteran, as a form of assistance from the Department of Veterans Affairs. If you are currently serving or have been honorably discharged, these loans can be of great help in getting the funds you need to better your home.

Why do Veterans Need Loan Assistance?

Veterans often have difficulty getting loans because their financial profiles are on the weak side. They may have low, or no credit, as a result of serving in the military during key credit building years. Further, they likely have low asset bases since they need few assets when they are serving. This can make getting a standard loan challenging, so the VA offers support. The VA will insure the loan, providing a guaranty against default. If the individual defaults on the loan, the VA will repay the lender up to the guaranty amount. This makes the loan much less risky to extend even if the borrower is otherwise a risky candidate.

What Type of Assistance do I Get?

You will qualify for a guaranty up to a certain limit based on your credit and your military service. You can find out the size of this guaranty by applying for your certificate of eligibility. This certificate confirms you are eligible for the loan by confirming your military service based on your active service number or your discharge papers. The certificate will show the size of the guaranty you can receive on a home loan or construction loan.

How do I Apply?

First, you will need to get your certificate by applying online through the Department of Veterans Affairs. You can print this certificate at your home computer and take it with you to a private lender. Then, you will need to apply with a private lender for the loan you need. The lender will evaluate your credit, income and other criteria, but your certificate of eligibility for the VA guaranty will go a long way in helping you get the loan. It is best to work with a VA approved lender, because these lenders will be familiar with the process. They can then submit the request for the guaranty on your behalf directly to the VA. Once the loan is secured and verified, you can move forward with your project.

Which Construction Projects Qualify?

You may be surprised to learn of the wide array of projects covered. You can repair damage from termites, replace a septic or plumbing system, clear out asbestos, repair water damage or even put in a pool. Essentially any value-added construction project has the potential to qualify, but the size of the loan guaranty may partially depend on the plans you have for the construction project. You should take note, however, that defaulting on this loan could cost you the ability to get a VA loan in the future or even lead to foreclosure on your property. Choose your projects carefully.

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