Do You Work with VA Loans?

A common question that Home Builders get is “Do you work with VA loans?” The short answer is maybe. To understand this answer it is important to understand that in construction there are actually two loans: the short term construction loan, and then after construction is complete the loan is converted (in essence refinanced) to a 30 year mortgage.

Some first-time homebuyers are misinformed as to how a VA Loan works. The Veterans Administration does not normally actually provide the money for the loan. What the VA does is guarantee a loan for a veteran of military service.

The VA loan began in 1944 as a way of helping US servicemen coming back from war to get loans to buy home. It provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans.

In most cases, the VA guarantees loans for vets who meet certain requirements, such as a good credit rating.  Also, it’s important to note that the VA only guarantees the loan if the veteran has the income to handle house payments. A VA loan guarantee is not an automatic benefit.

The loan itself is made by a private lender, such as banks, savings & loan institution, or mortgage companies, and the loan must be for owner occupancy. The guarantee means the lender is protected if you or a later owner fails to repay the loan. The guarantee replaces the protection the lender normally receives (i.e. no PMI) by requiring a down payment allowing you to get better financing terms than you might find otherwise.

But there are several clauses that may make a VA loan difficult in a construction loan. Your best bet would be to check with a lender who does construction loans near you. Please see our  Lender List.