JUNE 12, 2023 – Building a home takes lots of planning and is much different than buying a pre-built home. Although they are different in many ways, they also have similarities. When starting the process to either build a home or buy a home it’s important to first do your due diligence. Buying a home that is available on the market is usually significantly faster than building a home from scratch. Maybe you’re on the fence and not sure what to do. Interest rates have gone up and down but have trended higher in the last year. Deciding to build, buy or wait on the sidelines is thought for many Americans. Below are some questions and answers to help you get started in this process.
Can I get pre-approved to buy and build at the same time with a VA loan?
Yes, and it’s great to have 2 options to expand your options. If one falls out then you have another option.
Do I need a construction loan lender for a VA construction loan?
Yes, Construction loan lenders like Security America Mortgage have a department dedicated to the VA one-time close construction loan.
Do all new home construction loans work the same?
No, there are several types. Some have 2 closings and 2 sets of closing costs and the one-time close construction loan doesn’t.
Do construction loan lenders all offer the same interest rates?
No, some construction loan lenders offer a variable rate and temporary financing and some offer a fixed guaranteed rate.
Is the construction to permanent loan the same for all construction loan lenders?
Some lenders offer a one-time close to avoid extra closing costs and some lenders have 2 closings so it’s not the same.
Do all VA construction loan lenders do a VA one-time close construction loan?
No, but at securityamericamortgage.com you’ll find a lender who does VA construction loans with a one-time close.
Does the Department of Veterans Affairs set a minimum credit score?
Lenders will set their minimum credit score requirement not the VA.
What types of construction loans are available to use when building a home?
- VA construction loan aka VA one-time close construction loan
- USDA one-time close construction loan
- FHA one-time close construction loan
- Conventional one-time close construction loan
- Construction-only loans with adjustable rate mortgage for the construction period then permanent financing aka Traditional construction loan.
How does the construction process work with a one-time close construction loan?
- You need a lender-approved builder.
- You need to own land, have it already financed, or try to close on the land and construction at the same time.
- Builder plans get approved by the lender
- You must get approved for construction to permanent financing before construction starts
When Does Construction Loan Repayment Begin?
With a one-time close construction loan your repayment of the loan will start when the home is finished.
What are construction loan interest rates for 2023?
Construction loan interest rates in 2023 are typically in the range of 5% to 10%. The exact rate you qualify for will depend on your credit score, down payment, and the lender you choose.
What factors affect the construction loan rates?
- Credit score: The best construction loan Lenders typically require a minimum credit score of 620 for a construction loan. A higher credit score will qualify you for a lower interest rate in most cases
- Down payment: Lenders typically require a minimum down payment of 20% for a construction loan. A larger down payment will qualify you for a lower interest rate in certain cases. A VA construction loan from Security America Mortgage can be 0 down payment.
- Lender: Different Mortgage lenders offer different construction loan rates on construction loans. It’s important to shop around and compare rates from multiple lenders before you choose one.
When you Apply for a Construction Loan what are the terms and conditions to consider?
- Interest rate: What is the interest rate on the loan? Is it fixed or adjustable?
- APR: The APR, or annual percentage rate, includes the interest rate and other fees associated with the loan.
- Loan term: How long will you have to repay the loan?
- Prepayment penalties: Are there any prepayment penalties if you pay off the loan early?
- Draws: How will the loan be disbursed? Will you receive money as needed, or will you receive a lump sum at the end of the construction process?
Can I start a construction project with my own funds and get a construction loan later?
You can but it’s not a good idea and you won’t be able to do a one-time close construction loan after you started. You will need a personal loan, home equity loan, renovation loan, future permanent mortgage, or another home construction loan.
How Much Do Construction Loans Cost on Average in 2023?
The cost can vary depending on the size and complexity of the project, as well as the lender’s terms and conditions. There are some sources on Google that say $250,000. However, upon talking to executives of some of the best construction loan lenders; we’ve heard that it’s more near $400K.
Who is the best construction loan lender in Texas?
According to many reviews online, it’s clear that Security America Mortgage has a great track record, particularly on helping the US Armed Forces service members and Veterans with the VA construction loan and other construction loan programs.