For many qualifying Veterans, a VA home loan is a popular lending program that can be utilized to buy or refinance an owner-occupied residential property. Whether the home is a “stick built” SFR, manufactured home, or a duplex the VA offers no down payment options.

However, many Veterans and those in the lending and real estate industry don’t know that this loan program can also go towards a construction loan or VA renovation loan. In this 2 part blog installment, we will examine the loan and how it works for both new construction and homes need a bit of “rehab.”

How the Oregon VA Construction Loan Works

In the case of a VA construction loan, it is designed to help a Veteran acquire funds to buy bare land and the funds to pay a contractor to build a home. Additionally, a Veteran can buy a manufactured home and put that on the property as well.

How the VA Renovation Loan Works

The VA renovation loan will allow for Veteran to buy a home that needs repair. The loan provides for funds to do minor or significant rehab work to the house. The loan can also for a refinance option.

Benefits of VA Renovation Loan & VA Construction Loan

  • No Money Down
  • No payments due during construction
  • Minimum 620 FICO score
  • Interest rate lock protection during construction
  • Seller allowed to pay closing costs up to 4% of the price.

With most construction loans, they require that the borrower pay interest on the loan during the construction phase. However, the VA construction and rehab loans do not require the Veteran pay interest. Not paying interest can be very helpful when a person needs to rent a home to live in while they are waiting for their house to finish.

Depending on the project, many homes can take 6-12 months to build. While minor remodel work is okay to live in, the VA will not allow others to live in a house needing major repair.

Additional VA Construction and VA Renovation Loan Perks

These loans have built into them many guarantees that many typical take-out construction loans don’t. Once there’s approval for the Veteran:

  • They can opt for a locked loan for the entire duration of construction. Locking, or securing, ensure their interest rate doesn’t go up if the national standards raise.
  • The loan can be for 15yrs or 30yrs. Many take-out construction loans are short term loans and need to be refinanced to a permanent mortgage after the project is complete.
  • Depending on the Veterans eligibility, the VA will allow loan amounts of up to $1mill. For loan amounts over the current conventional loan limits, the veteran usually has to put down 25% of what the difference is. If the loan limit is $440k and the price of building or buying is $550k, $100k difference, then the Veteran needs to put $25k down.

Contact Us Today

Fortunately, here at Strategic Mortgage Solutions Inc., we offer many types of these construction loans. VA Construction and Rehab loans are just some of these loans we can provide. In part 2 of this blog installment, we’ll look deeper into what the typical process looks like and how it differs to the regular VA loan.