VA Construction Loan Lenders for No Down Payment New Construction

Active military & Veterans have a great option to build a home with no money down. Furthermore, new VA loan rules now allow 100% construction financing with no limit! So, who are the VA construction loan lenders providing these benefits for VA eligible borrowers? For NC, SC, VA, & MD, we are a VA construction loan lender offering no money down financing. For instance, we just closed a VA construction loan that totally financed the land and builder contract of $500,000 in Fayetteville NC. That’s right, $500,000 land and build cost, $500,000 construction loan! When searching construction loans for military and Veterans, it is tough. But, we are glad you found us and we hope to provide a solution to build your new home.

VA construction loan lenders
Photo by Avel Chuklanov on Unsplash

Why Most New Construction Loans Do Not Work With VA Loans

Some may say, “What’s the big deal”. Yet any VA eligible buyer who is building a new home finds out there’s usually a down payment requirement. At least, when a construction loan is involved. So, why is there a down payment required on the construction loan when VA is a no money down loan?

Even though the permanent loan is a VA no money down loan, most lender’s construction loan has a down payment requirement. Typically, construction loan down payment requirements range from 5 – 20%. Kind of defeats the purpose of a no money down VA loan doesn’t it? Plus, it crushes the new home buyer’s dream of a custom built home. Some lenders offer both the construction and VA loan, while other VA lenders partner with another bank for the construction loan.

VA Construction Loan Lenders in NC, SC, VA, MD

Although we offer one time close conventional construction to perm loans in 46 states, we can only offer VA construction loans in 4 states which is our bank footprint. Although, we are able to provide a VA permanent loan up to 100% of appraised value to pay off an existing construction loan in 46 states.

States We Offer VA Construction Loans

  • North Carolina
  • South Carolina
  • Virginia
  • Maryland

We can provide permanent VA financing to pay off an existing construction loan in all states except TX, NY, HI, AK.

How a VA Construction Loan Works

Basically, there are two main ways to look at VA construction perm loans: Already own the land or buying the land at closing. We offer both at 100%, but let’s discuss how each is treated.

I Own My Land and Want a VA Construction Loan

Owning land already creates a huge advantage for a Veteran. Whether there is a land loan or not, we will lend 100% of the as-completed appraised value as determined by a VA appraiser. Here’s how the value is determined. The assigned VA appraiser appraises the new home plans with the land as if the home is already completed. It is compared to similar homes that have recently sold in the area. Our VA loan will go up to the VA appraised value and more importantly, our construction loan will match it.

Since the Veteran owns the land, we treat this as a refinance. So, we will include paying off the land (if there is a balance), builder contract price, and closing costs. All of this is up to the as-completed appraised value. Furthermore, a borrower may even recoup funds used to buy the lot via cash out at the permanent loan closing! All of these are hugely popular advantages for military Veterans building a new home!

I Am Buying a Lot and Building at the Same Time

In the case of purchasing a lot, it is a little different. We need to cover the purchase of the lot and construction costs. If the home and land appraise for the same as the total cost, the buyer will need to bring closing costs to closing. But, if it happens to appraise for higher than the land and home cost, we allow for closing costs to be included in the loan up to the appraised value! Additionally, the builder could pay closing costs when necessary. Either way, we have removed much of the down payment restrictions that have kept Veterans from building a custom home.

VA Construction Loan for Renovations

There is an existing product called a VA renovation loan, but it does not allow for structural renovations. Although, our VA construction loan will help Veterans fund major renovations to a home. This may be used for a purchase and renovation project or a renovation for your existing home. Just like the traditional VA construction loan, we will lend up the as-completed value of the home and land.

So, if the price is $300,000 and renovations are $100,000, and the home appraises for $400,000, then we could lend the whole $400,000. If it appraises higher, we could include closing costs to up to that value! Talk about getting an HGTV TV show type make-over!

Get Your Builder Approved for our VA Construction Loan

Initially, make sure your builder has their VA builder ID. Not only is it required by VA, it is also a very easy process. Click the button below to get a VA builder ID.

Then, the builder needs to become an approved builder with our bank. We need our completed application, contractors license, proof of insurance, and a couple other items. Once approved, a contractor only needs to provide an updated license and insurance annually.

Builder Benefits

This part is huge for builders. Getting paid their construction draws on-time is key. Also when the house is finished, the builder wants and needs to get paid the final draw. It is needed to pay subcontractors and materials, make a profit, and move onto the next project. We recognize this so we are quick to get the builder their funds.

Plus, builders able to offer 100% financing will gain more clients. Especially around military base towns like Fayetteville, Jacksonville, Norfolk / Chesapeake, Goldsboro, and Charleston.

VA Jumbo Construction Loans

Now, this will really blow your mind. Not only do we provide a 100% VA construction loan. Actually, we will do the same for VA jumbo loans. There’s two reasons: January 1, 2020 VA loan limits go away for VA eligible borrowers with full entitlement and because our construction loan will match the VA loan. If you are reading this prior to 1/1/2020, we will still lend 100% of the VA appraised value because the house will be finished after 1/1/2020.

Advantages of a VA Jumbo Construction Loan

Construction Feature VA Jumbo Construction Conventional Jumbo
Down Payment None 10, 20% or more
Monthly PMI None Yes, if > 80%
Funding Fee Yes No
Cash Back at Closing Yes on case by case basis Typically not

VA Construction Loan Success Story

Earlier I mentioned how we closed a no down payment, $500,000 VA construction loan in Fayetteville NC near Fort Bragg. Initially, the Veteran had worked with a lender for about one year trying to secure a construction loan with a permanent VA loan. With a land price of $60,000 and build cost of $440,000, they were having to bring over $90,000 to closing. Feeling dejected, the buyers did not want to bring that much money. So, they kept looking until they read one of our VA construction loan articles.

At first, they were skeptical. Why would they be required to bring so much money to closing and now only bring closing costs? Because the other was treating it as a conventional construction loan. We were using a 100% VA loan with a matching 100% construction loan. To say the least, the buyers were extremely happy to build their dream home with financing that worked for them.

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Written By: Russell Smith