VA One-Time Close Construction Loans: When Mortgage Payments Start
These loans feature a single application and approval process, which makes the entire process more streamlined and easier to manage than construction loans that have two applications (one that pays for the construction and one for the house purchase itself) and two closing dates.
Building a home takes time. Borrowers will apply for the loan, and once it is approved the construction phase can begin, but that process may go longer than you anticipate. Delays and contingencies can occur during the construction phase and borrowers should not be surprised by this.
The First VA Construction Loan Mortgage Payment
But there is an understandable concern about the mortgage, especially in cases where it may take longer to get to the closing day signatures you want to make. When is the first mortgage payment on a VA construction loan due? Do you start paying right away, or do you wait until you move into the home once all the construction and inspections have taken place?
The VA Lender’s Handbook, VA Pamphlet 26-7, states in Chapter 7 (page 13) that the homeowner “begins making payments on a construction/permanent home loan only after construction is complete. Therefore, the initial payment on the principal may be postponed up to 1 year, if necessary.”
But that’s not all--borrowers need to be aware of the VA loan requirement that such loans “must be amortized to achieve full repayment within its remaining term.”
If you don’t start paying on your VA construction loan until the construction is complete and that project takes a full year, you will still be responsible for paying off the loan on the original payoff date--that date is generally not extended.
“The VA requirement that loans be amortized with approximately equal payments and the principal must be reduced at least once annually, also applies to construction loans. However, the final installment may be for an amount up to five percent of the original principal amount of the loan” according to the VA Lender’s Handbook.
VA Pamphlet 26-7 advises against making a “balloon payment” at the end of the loan to cover the months where the mortgage was not paid due to construction, but encourages the borrower and lender to work together to calculate a new payment that will result in full payoff of the loan at the original date.
FHA, VA, and USDA: One-Time Close Loans
Want More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA, and USDA One-Time Close Construction Program only allow
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- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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