VA One-Time Close Rates: Why They Run High and How to Fix Them Later
Andrew was three weeks into shopping builders when his loan officer sent over the rate sheet for his VA one-time close construction loan. He read it twice, then called me. The number was almost a full point higher than the VA purchase rate his neighbor had gotten on a resale home. He wanted to know if he was getting ripped off.
He wasn't. What Andrew ran into is standard pricing for VA construction financing, and once he understood why, the plan became simple.
Why the Construction Rate Runs High
A VA one-time close loan does two things a standard VA purchase loan doesn't: it funds the construction of a home that doesn't exist yet, and it converts into permanent financing once the home is finished, all under one closing. During the build, there's no finished house to serve as collateral. The lender is carrying construction risk, draw schedules, contractor risk, and timeline risk, for months before the home is livable. That risk gets priced into the rate for the life of the loan, which includes both the construction phase and the permanent phase behind it. That's the point higher Andrew saw. It's not an overcharge. It's the cost of financing something that's still lumber and a foundation.
The Fix Nobody Explains Up Front
Here's what a lot of veterans never hear from their builder's preferred lender: that higher rate is not permanent. The moment the certificate of occupancy is issued and the construction loan converts into permanent VA financing, the veteran becomes eligible for a VA IRRRL, the Interest Rate Reduction Refinance Loan. This is a streamlined VA-to-VA refinance built specifically to lower an existing VA rate, and it typically does not require a new appraisal or the full underwriting file a purchase loan needs. For a veteran coming out of a one-time close, it's the tool that erases the construction premium once the home is real and the risk is gone.
Andrew accepted the higher rate through his build, then refinanced with a VA IRRRL within months of the certificate of occupancy. His permanent rate landed at standard VA pricing instead of the construction rate he'd locked at closing.
What This Means If You're Comparing Rates Right Now
If you're a veteran shopping a VA one-time close and the rate looks a point above what you'd get on a resale purchase, don't assume something's wrong and don't walk away from the deal. Ask two questions before you sign anything: what is my rate during construction, and what does my IRRRL timeline look like once the home is complete. Any lender quoting you a one-time close should be able to answer both without hesitation.
The construction rate is temporary. Plan the refinance before you break ground, not after you move in.
Working With a Broker on a VA Build
I work with veterans across Charleston and every state I'm licensed in on VA one-time close construction loans. Because I'm a broker, I can shop the construction financing across multiple VA lenders rather than being locked into one shop's overlays, and I map the IRRRL exit with you from the very first draw schedule. If you're comparing VA construction rates and something feels off, call me at 843-569-7283 before you sign.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.