5 Steps To Build A House Through VA Mortgage Loan

Mortgage Terms

In comparison to conventional home loans, a VA mortgage loan offers several benefits to the borrower. As the mortgage loan is provided only to eligible members or veterans of the United States Armed Forces, the borrowers are not required to pay any down payment, along with obtaining lower interest rates. However, the Veterans Affairs (VA) does not act as a direct lender.

It only provides a guarantee to the lender on behalf of the veteran borrower. The guarantee enables the lenders to compensate the losses, in case the borrower defaults on the home loan. A veteran borrower can avail the VA home loan to purchase or refinance a residential property. However, he must understand the steps associated with building a house with VA financing.

1. Obtaining the VA Eligibility Certificate: The members or veterans of the US Armed Forces have to meet certain requirements to qualify for VA home loans. Normally, a veteran borrower is required to serve a specific amount of time in the Armed Forces based on his service period. You can visit the VA website to understand the eligibility rules to get a VA loan. If you meet the eligibility criteria, you can apply for a VA Eligibility Certificate through your local VA officer.

2. Getting You VA Loan Approved: You will find many VA-approved lenders offering these specialized home loans to veteran borrowers. But you have to contact each lender directly, and understand the options available to get VA-guaranteed construction loans. It is also a good idea to compare the interest rates charged by individual lenders to avail the best VA mortgage rates. There are also chances that you have to meet certain credit and income requirements set by the lender. However, the VA guarantee helps you in avoiding the credit checks and property appraisal process associated with normal home loans. Once you decide the right lender, and he approves your VA loan application, you will obtain a pre-approval for the VA mortgage loan.

3. Developing the House Plan: Once your VA loan is pre-approved, you can hire a builder approved by your lender. The builder will develop the plans for your residential property. As per the construction loan rules, the loan payment plan has to be determined by the lender and the builder. The payment made by the VA loan lender to the builder will also be used as a base to appraise the value of your residential property. So the appraised value of your house will keep on increasing as the construction work progresses.

4. Understanding the Contract: The clauses of VA loan agreements vary from one lender to another. But most lenders do not require the VA borrowers to start making loan payments till the construction project is not completed fully. However, you must understand the contract with the lender and builder to understand when you will be required to make loan payments. Also, you must monitor the construction project thoroughly to know about the loan repayment date.

5. Signing Loan Papers: Once the construction project is completed, the lender will evaluate the house and ensure that the builder has complied with all requirements as per the agreement. Then you will be required to sign the loan papers. As per the terms of the loan agreement, you have to make payments to the lender on a regular basis.

The VA also allows veteran borrowers to reduce VA mortgage rates by refinancing their existing VA loans. You can choose the right option to reduce your loan payments by avoiding the normal credit checks, property appraisal and documentation.