A VA construction loan is designed to finance the cost of new home construction as well as the purchase of land in one loan. Unlike traditional construction loans, VA construction loans offer several advantages to qualifying borrowers, such as no down payment requirement.
With such great benefits come stipulations set by the VA. One of the most essential requirements when using a VA loan to finance a new build is to hire a VA-registered builder.
To ensure a smooth building process, you want to make sure your builder is qualified to do a great job. We’ve put together some questions to help guide you during the selection process.
3 Questions to Ask a VA Builder
The VA does not actually approve builders, so you must do your due diligence when researching them. Let’s look at some vital questions you should ask a builder to ensure your dream home comes to fruition.
1. Are you a VA-registered builder?
To use your VA loan for new construction, you must use a builder registered with the VA. To simplify the process, the VA has created a tool that allows you to find VA-registered builders in your area.
But what if you want to work with a builder who isn't registered? There’s a process to become a VA builder and it’s pretty straightforward. We’ll get more into how to become a VA-registered builder below.
2. Do you finance the construction?
Whether a builder finances the construction of the home will play a significant role in determining the type of financing you need to obtain. If the builder finances the construction, you'll just obtain permanent financing and close once the home is complete.
Alternatively, your builder might prefer that you obtain a construction loan to finance the home build. In this scenario, the borrower's path to a VA loan is typically through refinance.
If you want to go this route with a construction loan, you'll want to weigh the pros and cons with a knowledgeable loan officer.
3. What type of warranty do you offer?
Builder warranties for newly constructed homes offer limited protection concerning workmanship, materials, and systems for specific elements of the house.
The VA requires a 1-year builder's warranty or a 10-year insured protection plan for new construction homes. Policies vary by builder; some may offer additional protections or warranty options.
Discuss each option and determine which warranty plan best fits your needs. You might also consider whether it would be cost-effective to pay for additional warranty protection or if you would rather pay for the expense out of pocket if a repair arises.
Know that when you work with Veterans United Home Loans, you have the support of a lending team that understands all aspects of VA loans. Whether you want to build or buy an existing home, we are committed to supporting you through your entire homebuying process.
How to Become a VA Registered Builder
The VA does not actually approve builders, so in most cases, a builder can receive their VA Builder ID Number within five business days.
There are four documents a builder needs to submit to the local VA Regional Loan Center to obtain a VA Builder ID number.
These documents include:
| VA Form 26-421 | Equal employment opportunity certification. A commitment to non-discrimination practices based on factors like race, religion, gender, age, and disability when accepting work. |
| VA Form 26-8791 | Certifies that the builder agrees to advertise services according to VA affirmative marketing guidelines. |
| Builder Information and Certification | Certifies that they will conform to VA build standards and that the property will meet VA minimum property requirements. |
| Builder’s License | This must be submitted if the state or locality requires builders to have a license. |
The VA does not approve builders, so the registration process is relatively quick.
In conclusion, selecting the right builder for your VA construction loan is a crucial step in ensuring the success of your home-building project. Collaborating with a builder who has a proven track record of delivering quality homes can streamline the process and help you realize your dream home. With the right builder by your side, you can navigate the complexities of a VA construction loan with confidence.
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