Four Yes-Or-No Questions Decide If You Should Build With A VA Loan
Four questions, answered honestly, tell you almost everything you need to know about whether VA new construction is the right path. Is your middle credit score 660 or higher? Do you have a licensed builder lined up who isn't a relative? Are there real comps near your target value from within the last 12 months? And can you accept a rate that runs about a point higher than a standard purchase loan? Four yeses and you're in the small group this loan is actually built for. One no, and there's no shame in stepping back and looking at other options.
Scarlett's Situation
A situation that comes up often involves a veteran who owns land, maybe family land passed down, and wants to build rather than buy something already standing. Scarlett, a Navy veteran, was in exactly that spot. She had a lot picked out but no clear sense of whether VA financing could actually get her there. Before shopping builders or pulling permits, she ran through the four screening questions.
Her middle credit score came in at 671, clearing the 660 threshold most lenders look for on construction files. She found a licensed general contractor with no relation to her family, no shortcuts on paperwork. Her appraiser pulled comps within the past year that supported her target value. And she planned her budget around a rate roughly a point above what a standard purchase loan would carry. Four for four.
Why These Four Questions, Specifically
VA construction underwriting is stricter than a standard VA purchase in a few specific ways. Credit standards tend to run a little firmer because there's more risk during the build phase. The builder has to be licensed, insured, and cannot be a family member, because that removes the appearance of a self-dealing arrangement. Comps matter enormously because the appraiser has to support the finished value of a home that doesn't exist yet, and thin or outdated comps make that appraisal shaky. And rate expectations need to be realistic upfront, because construction-to-permanent financing typically carries a premium over a standard purchase.
Miss one of these, particularly the comps or the licensed-builder requirement, and the file often stalls in underwriting or needs to be restructured into a two-time-close loan, which adds time and complexity.
What To Do Today
Pull your own middle credit score from all three bureaus. Call your builder and ask directly: are you licensed, and are we related in any way that could raise a flag? Ask a local agent or appraiser about recent land-plus-build comps in your target price range. And build your budget assuming a rate a bit above the going purchase rate, not the same rate.
Where I Come In
I work with veterans building homes across South Carolina and into North Carolina and Georgia. My job is to walk through these four questions with you before you fall in love with a builder or a lot, so you know exactly where you stand.
If you just answered yes four times, or even three, call me. I'm Jason Sharon with Home Loans Inc, and I find the path. Reach me at 843-LOW-RATE.