VA Construction Loans Explained

VA construction loans are meant exclusively for military veterans who want to construct a home and find it difficult to obtain loans otherwise. The one basic character of VA loan is it does not cover all aspects of a building project. The limitation is tthat the government stipulates no down payment and because there is no initial investment, finding a lending institution may not be easy.

This program, however, has provided the opportunity for many businesses to come forward to help veterans. These business houses have a team of seasoned real estate agents who have the required expertise and possess updated knowledge of the market. The real estate agents work closely with veterans and get them the best deals, driven by a natural impulse to help the veterans who have given their best years serving the country.

Getting VA Construction Loan

Getting a VA Construction Loan is a somewhat cumbersome process because you will have to first approach your VA office and apply for a VA Eligibility Certificate. You should provide all information regarding the dates of your joining and leaving the services. After you get your certificate, you will have to start searching for lenders who offer VA Guaranteed Loans.

Nature of VA Construction Loan

VA loans do not have a down payment requirement, except in extreme cases when the cost of home is in excess of the value determined by the VA. The VA loan carries highly competitive rates and there is every scope for negotiating the rate of interest with the lender. VA loans do not have prepayment penalties. VA loans require appraisal reports to determine the value of a home.

Also, the VA will insist on doing compliance inspections during new construction to satisfy that the construction work meets accepted quality standards and does not deviate from the plans and specifications on which VA appraisal is based. VA will further try to help you in guiding your builder to correct any valid defects if you complain.

Limitations of VA loans

You must remember that VA will not function as your builder or architect, nor will it play any role in supervising the construction. VA will not guarantee you against defects in construction. However, the VA will lend you support if you encounter practical difficulties in either buying or constructing your home.

VA has no authority to compel a builder to rectify construction defects or regulate the builder to live up to his contract with you. VA offers no guarantee that you can resell the home in keeping with the investment you made. The investment decision you make is your own decision and VA will not interfere.

As a veteran, if you apply for a VA construction loan please know the approval process is quite tedious and time-consuming, but at the same it is not impossible to obtain if you are diligent. It is reported that after the end of World War II, more than 14 million veterans have purchased homes availing VA loans. The fact is almost all of them have bought neatly constructed houses and are promptly settling the VA loans.

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