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VA One-Time-Close/OTC Construction Loans
You Served, You Earned It!
The Zero-Down Payment One-Time-Close/OTC Mortgage for our Veterans and Current Military Personnel
VA Construction Loan Guidelines
Loan Purpose
- Finance Construction Costs
- Purchase a lot
- Land can be currently owned, including:
- Recently purchased
- Owned Free and Clear
- With a current mortgage
Credit Profile
- 620 minimum middle credit score for all borrowers on the loan
- 620-659: A minimum of 2 qualifying credit scores are required
- 660+: A minimum of 1 qualifying credit score
- No foreclosure or short sale within three years of contract ratification date
- No Chapter 7 bankruptcy discharge within two year of contract ratification date
Construction Timeframe
- Construction timeframe is based on the construction type, with a maximum of:
- 150 days for a manufactured home
- 180 days for a modular home
- 270 days for a stick-built home
- Construction can start immediately after closing
Draw Option
- This option requires a “Project Review” by the Underwriter/Lender
- At closing the land seller or if financed, the land will be paid off/funded
- The maximum number of draws are based on the house type, with:
- Manufactured/Modular Home Retailers allowed up to three draws
- Site-Built Home Builders allowed up to five draws
- For Manufactured/Modular homes, provided the house has been built, the factor invoice is in place, acceptable property coverage is in place, the Retailer may request that the factory or floor-plan source can be paid the invoice cost of the home. This doesn’t count against the Retailers three draws
- Draw amount will be based on inspections and percentage of completion
- Maximum amount that can be paid out prior to the final draw being issued is 80% of the Builders/Retailer’s Contract Price
- Final draw is paid after the Certificate of Completion or Occupancy is issued
No Draw Option
- Streamlined process where the Builder/Retailer has agreed to no interim construction draws through out the process and will receive all funds at the time the home is completed
- At closing the land seller or if financed, the land will be paid off/funded
- Saves time since there are no 3rd parties involved in performing a Project Review
- Builder/Retailer pays a lesser Administration Fee
OTC Administrative Fees and Construction Interest
- The Administrative and Interest cost of a One-Time-Close loan is based on the type of the home, amount financed, and whether the Builder/Retailer request to be paid via a draw. See below chart for an estimated break-down of the One-Time Close Administration Fee:
| Builder Financed Amount 1,2 | Manufactured Home (Max 150 Days 3) | Modular Home (Max 180 Days 3) | Site-Built Home (Max 270 Days 3) | |
|---|---|---|---|---|
| No Draw Option | No Interim Construction Draws | $2,500 | $4,300 | $5,100 |
| Draw Options | Up to $100,000 | $6,700 | $6,800 | $8,000 |
| Up to $125,000 | $7,800 | $8,100 | $9,400 | |
| Up to $150,000 | $9,000 | $9,300 | $10,800 | |
| Up to $175,000 | $10,200 | $10,500 | $12,300 | |
| Up to $200,000 | $11,400 | $11,700 | $13,700 | |
| Up to $225,000 | $12,600 | $13,000 | $15,100 | |
| Up to $250,000 | $13,800 | $14,200 | $16,600 | |
| Up to $275,000 | $15,000 | $15,400 | $18,000 | |
| Up to $300,000 | $16,100 | $16,600 | $19,400 | |
| Each Additional $25,000 | $1,200 | $1,200 | $1,400 |
1 Builder Financed Amount is the amount the Builder/Retailer borrowers from the lender during construction, including any contribution to land costs, closing costs, and prepaids. This amount can’t exceed the final contract price for the home and improvements.
2 Financed land cost more than 20% of the loan amount may require an additional fee. Please call for more information.
3 If construction if not completed by the agreed upon date, a fee equal to 10% of the One Time Close Administration Fee will be charged to extend the construction period for each 30-day period up to a maximum of one year.
- The Administration Fee is inclusive of the following:
- Construction Administration Fee
- Construction Underwriting Fee
- Construction Closing Coordination Fee
- Interim Construction Interest
- Inspection Fee
- Draw Fee
- Title Updates
- Modification and Agreement and Recordation
- Note: The Administration Fee is charged directly to the Builder/Retailer (not the borrower) and therefore will not appear on the Loan Estimate
Builder/Retailer Responsibility
- The builder/Retailer must act as the only General Contractor (“GC”) on the project
- GC must be registered with the VA. See VA Builder Registration for a list of VA registered builders
- GC can’t be related to the borrower(s) or an employee/employer of the borrower
- GC must be insured, licensed, and bonded
Loan Amount
- With zero down, the maximum loan amount is the standard conforming loan limit, which is currently $806,500, or VA High Balance loan limits
- Maximum $750,000 regardless of the maximum VA loan limits
Funding Fee
- Funding Fee is waived for Veterans receiving VA related disability income, have been awarded the Purple Heart, surviving spouses of Veterans who haven’t remarried
- Funding Fee Calculations are as follows: Purchase:
| Type of Veteran | Down Payment | % for First Time Use | % for Subsequent Use |
|---|---|---|---|
| Active Duty, Reserve, National Guard | None | 2.30% | 3.60% |
| 5% or more but Less than 10% | 1.65% | 1.65% | |
| 10% or more | 1.40% | 1.40% |
Ratios
- As determined by Automated Underwriting System or AUS with DTI ratios up to 65%. Requires a Desktop Underwriter “Approved/Eligible” or Loan Prospector “Accept” findings
- Manual Underwrite is not available with the VA OTC program
Property Type
- One-unit properties only
- Stick Built Housing
- Modular Homes
- Manufactured Housing – Multi-wide only (no single wide permitted)
- Ineligible property types include: condominiums, multiple Homes on one lot, unique properties including log homes, tiny homes, etc.
Occupancy
- Owner occupied only
- All Veterans on the loan must have ownership in and occupy the property
- Non-married Partners not permitted on the loan request
- No co-signers permitted
Documentation
- All loans must be fully documented per Agency Guidelines
- For Self Employed Veterans, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)
Down Payment/Closing Costs
- 0% down payment required, with full VA Eligibility
- Builder/Retailer contribution toward buyers closing costs and escrows up to 4% of the construction costs plus allowable VA items
- The Seller of the land contribution toward buyers closing costs and escrows up to 4% of the cost of the land
Terms
- Amortization period: 15 and 30-year fixed rate
- Borrowers are qualified on 29 and 14 years for a 30- and 15-year mortgage; respectively
