VA One Time Close Construction Loan
VA construction loan guide
Circular 26 25 1
Circular 26 18 7
Lender Handbook Chapter 7
A VA One Time Close construction loan rolls land, construction, and your permanent mortgage into one loan and one closing. You qualify up front, the builder is approved by the lender, and funds are released in draws during construction. After final inspection, it converts to a standard VA mortgage without a second closing.
What it is
- Single loan structure: One note covers the land purchase, build costs, and the end mortgage, so you avoid two separate loan closings and duplicate settlement fees.
- Appraisal is as completed: The VA appraisal is based on plans and specs, using the expected finished value rather than the empty lot value alone.
- Construction draws: The builder is paid in stages as work is completed and verified, which protects both the borrower and the lender during the build.
- Builder ID no longer required: VA removed the VA issued Builder ID requirement in a March 2025 circular, though lenders still vet licensing and insurance.
Why Veterans use it
- Zero down is possible: Many lenders allow eligible Veterans to finance up to 100 percent of land plus construction, subject to appraisal support and underwriting approval.
- No monthly PMI: Like other VA loans, there is no monthly private mortgage insurance, which can materially lower the payment compared with low down conventional options.
- One set of closing costs: Since there is one closing, you avoid paying two rounds of title, escrow, lender fees, and recording costs that often show up with two close builds.
- Rate certainty can improve: Some lenders offer a permanent rate lock early, which can reduce stress when rates move during an 11 to 12 month build timeline.
How it funds a build
- Preapproval first: You start like any VA loan, with entitlement, income, assets, and credit review, and many lenders target stronger credit profiles for construction.
- Plans and fixed price contract: The lender typically requires detailed plans plus a fixed price build contract, since cost overruns create underwriting and draw issues.
- Draw schedule during construction: Funds are released at milestones like foundation and framing, with inspections or verification tied to each draw to keep the project controlled.
- Automatic conversion at finish: When the home passes final inspection and you have occupancy approval, the loan converts to the permanent VA mortgage without re underwriting or a second closing.
Requirements and pitfalls
- Primary residence only: You must intend to live in the home, so vacation builds and pure investment projects are not eligible under VA occupancy rules.
- Payments during construction vary: Some lenders require interest only payments on drawn funds, while others allow interest to be included in the loan structure, so ask before you sign a contract.
- Home type limits are real: Standard stick built and modular homes are common, some manufactured builds may work, but many lenders will not approve tiny homes, container homes, or unconventional structures.
- Builder approval is still strict: Even without a VA Builder ID, lenders verify licensing, insurance, financial capacity, and track record, which is often the hardest part of the entire transaction.
FAQs
What is a VA One Time Close construction loan?
It is a construction to permanent VA loan that finances land, construction, and the final mortgage in one closing. The builder is paid in draws during the build, then the loan converts to a standard VA mortgage after final approval.
Do I make payments during the construction phase?
Often, yes, but it depends on the lender. Many require interest only payments on the amount already drawn, while others structure the loan so construction interest is included. Confirm this before signing the build contract and draw schedule.
Do I need a VA Builder ID to use this program?
Key Takeaways
- One closing covers all phases, which often lowers total fees compared with two separate closings.
- Zero down is possible for eligible borrowers, monthly mortgage insurance does not apply under VA rules.
- Interest only during construction improves cash flow, principal and interest begin after completion and conversion.
- Licensed insured builders, warranty coverage, and Minimum Property Requirements remain mandatory program elements.
- Rate locks can be secured early, careful planning protects against schedule slippage and costly extensions.
- Organized documents, clear plans, and responsive communication accelerate underwriting, inspections, and draw releases.
What is a one time VA construction loan, and who can use it
It is a single loan that finances land, construction, and the permanent VA mortgage with one closing. Eligible Veterans, service members, and some surviving spouses can use it to build a primary residence while preserving hallmark VA advantages like no monthly mortgage insurance and potential zero down structures. For baseline purchase eligibility and occupancy context, review the VA purchase loan overview that explains program use and primary residence requirements on the official site VA purchase loan overview.
- The single closing format reduces duplicate title, recording, and lender charges, you sign one set of documents, complete one appraisal, then you convert to permanent terms automatically after final inspection and completion documentation without a second settlement event.
- During construction, payments are typically interest only on the funds that have been drawn, this improves cash flow while you carry rent or another mortgage, then switches to principal and interest when the home is complete and move in is documented.
- Underwriting still tests income stability, credit quality, and VA residual income by region and household size, your approval size reflects both capacity and the appraised finished value of the planned home on your selected lot in the chosen neighborhood.
- Verify eligibility and authorize Certificate of Eligibility retrieval, then ask your lender to set a realistic budget envelope for land and building costs based on current income, obligations, and expected property taxes and insurance for the finished home.
- Engage a licensed insured builder to produce plans, specifications, and a line item budget, then collaborate with your lender to ensure the project scope aligns with underwriting expectations and likely appraisal support for the completed structure and site.
- Confirm that your down payment expectation matches entitlement status and appraised value, then plan conservative reserves so you remain comfortable during the build, especially if material costs or schedules move modestly as work progresses on site.
How does one closing, one appraisal, and one rate lock actually work
You sign once, you appraise the finished home, you lock the permanent rate before construction begins. The loan opens with a construction phase, then modifies to permanent terms at completion without new closing documents. The VA buyer guide describes construction to permanent mechanics at a consumer level and explains how conversion follows successful inspections and completion documents VA Home Loan Buyer Guide.
- The initial appraisal is based on plans and specifications with comparable sales in the area, it sets the finished value that anchors the loan amount and conversion path, so provide accurate plans and realistic allowances that support market value credibly.
- Rate locks vary by lender, some offer extended locks for single close construction, extensions may cost money, so align the schedule with permit timelines and builder capacity, then include a small buffer for weather or supply delays to protect pricing.
- Because the permanent mortgage is already in place, you avoid re underwriting at completion in most cases, however lenders still verify final documents, inspections, title updates, hazard insurance, and occupancy evidence before converting to regular principal and interest payments.
- Request a written explanation of the lock window, the cost of extensions, and the conditions that trigger a reprice, then pick a timeline that matches the build calendar and your realistic start and finish dates for the project.
- Coordinate permits, utility approvals, and material lead times before you lock, then hold a kickoff meeting with lender and builder teams to align access, inspection windows, and documentation responsibilities for each stage of the construction plan.
- Keep a shared calendar that includes inspection milestones and draw dates, then update it weekly so everyone understands current progress and the tasks required to keep the project inside the rate lock window comfortably.
Which lenders and builders support one time close, and what does the VA require
You need a VA approved lender and a licensed insured builder who accepts VA documentation and warranty obligations. Owner builder structures are rarely allowed. The VA Lenders Handbook describes lender and builder responsibilities, draw administration, warranty expectations, and documentation standards used to manage risk and protect borrowers during construction VA Lenders Handbook.
- Lenders review builder licenses, insurance certificates, and contracts, they confirm fixed price or guaranteed maximum cost terms, and they approve draw schedules that match construction milestones so inspections and disbursements stay synchronized with real work in the field.
- Builders must agree to provide a one year builder warranty or an insured ten year plan, supply lien releases, and cooperate with inspection access, these protections help ensure workmanship quality and protect collateral and consumers in the early years of ownership.
- Borrowers benefit from selecting teams that regularly close one time VA construction loans, familiarity with forms, inspections, and escrow requirements reduces errors and shortens the path from ground breaking to completion and permanent conversion substantially for most projects.
- Ask prospective lenders how many VA single close construction loans they closed in the past year, then request a complete checklist for builder documentation, draw procedures, inspections, and final conversion so expectations are clear before signing contracts.
- Collect builder references for similar homes in your price range, review warranties and project photos, then confirm that the builder’s schedule aligns with your chosen lock window and the lender’s inspection cadence and disbursement policies carefully.
- Confirm upfront which soft costs are eligible, how contingency funds are handled, and how change orders will be documented, then include these terms in both the loan file and construction contract to avoid later confusion or delays.
How are draws, inspections, and conversion to permanent handled in practice
Funds sit in escrow, inspections verify progress, then the loan converts after final completion and title update. The VA Construction and Valuation resources explain how inspectors and appraisers document milestone progress and how the Notice of Value and completion evidence support safe disbursements and the final conversion to permanent terms VA Construction and Valuation.
- Milestone inspections commonly follow foundation, framing and dry in, mechanical rough ins, drywall and interior finishes, and final completion, each release requires signed documentation, invoices, lien waivers, and, when requested, photographs that confirm compliance with plans and approved materials.
- If an inspection shows incomplete work or material deviations, the lender can reduce or delay the draw until corrections are completed, this protects quality, reinforces compliance, and helps keep conversion timelines on track later in the process.
- Before conversion, the lender confirms the final inspection, the title update, hazard insurance endorsements, and occupancy evidence, then issues the modification to standard principal and interest terms under the permanent payment and escrow structure for taxes and insurance.
- Request the full draw schedule and inspection list in writing before closing, then share it with the builder and title company so everyone understands documentation, timing expectations, and the sequence for access and approvals at each stage.
- Designate a single point of contact for the lender and inspector, respond to questions within one business day, and keep approvals and releases organized in one folder so funds are not delayed for missing signatures or outdated forms.
- Walk the home with the builder before the final draw, complete punch lists, collect final lien waivers, and verify the occupancy ready condition so conversion can occur without additional conditions or requests for re inspection or documentation.
| Phase | Borrower focus | Lender focus | Builder focus |
|---|---|---|---|
| Foundation | Confirm site utilities and drainage plans are implemented as designed | Verify inspection and title update before releasing funds | Provide invoices and lien waivers for completed work |
| Framing and dry in | Review window and door specs against contract and allowances | Confirm inspection satisfies structural and weather protection goals | Document materials and schedule for mechanical trades |
| Mechanical rough ins | Approve electrical and plumbing locations for function | Check inspection results and maintain escrow records | Coordinate trades and pass local code inspections |
| Interior finishes | Finalize selections and confirm allowance balances | Release funds after progress confirmation | Manage suppliers, keep schedule aligned to inspections |
| Final completion | Complete punch list and provide occupancy evidence | Issue conversion after title update and documents | Finish clean up and deliver keys and warranty packet |
What documents and timeline produce a fast, low friction single close approval
Begin with your Certificate of Eligibility, then submit a complete packet and a realistic calendar. Lenders can usually retrieve your certificate electronically, which confirms eligibility and any funding fee exemption. The VA explains borrower and lender methods for obtaining a certificate, a key step that speeds preapproval and disclosures for construction to permanent loans Request a Certificate of Eligibility.
- Your packet should include identification, pay records or benefit statements, bank statements, plans and specifications, builder licenses and insurance, a fixed price contract or guaranteed maximum cost agreement, and a line item budget that matches the appraisal assumptions for finished value and market comparables.
- Develop a calendar that includes permits, utility work, inspections, draw targets, and expected completion, then give your lender and builder a shared view so rate locks, material orders, and inspection visits can be scheduled without repeated rescheduling or idle days.
- Ask for a preclosing call between lender, builder, title, and you, this meeting clarifies how disbursements, lien releases, and corrections will be handled, and it sets response time expectations that reduce friction when questions arise during busy phases.
- Authorize the lender to retrieve the certificate and credit, then upload a complete packet on day one, complete files are reviewed first which collapses the approval timeline and queues your project for fast first draw readiness.
- Confirm reserve expectations in months of payments and which accounts are acceptable, then document access and ownership to those funds so the underwriter can count them without additional conditions that would slow approval or draw releases.
- Reconfirm the calendar after permits issue, then align the rate lock period to your updated schedule with a modest buffer, this reduces the chance of extension costs or rushed decisions late in the build cycle.
What costs are eligible, and how does the VA funding fee apply to single close construction
Land, approved site work, building costs, and the funding fee are commonly included when allowed by underwriting. The VA outlines funding fee brackets by first or subsequent use and down payment tier, and explains allowable borrower costs for VA loans, which lenders use to structure total financing for construction to permanent projects VA funding fee and costs.
- Many borrowers finance the funding fee within the loan amount, which preserves cash, although it increases the principal balance, compare scenarios with and without financed fees using payment and total cost over a realistic expected holding period.
- Soft costs like permits, interest during construction, inspection fees, and title updates may be included when allowed by lender policy and appraisal support, clarify eligibility early so the closing disclosure matches expectations and project cash planning accurately.
- When material costs rise, change orders may require additional cash or scope adjustments if the finished appraisal does not support the higher budget, discuss contingency planning with your builder and lender before construction begins to avoid late surprises.
- Request a loan estimate that itemizes land, site work, hard costs, soft costs, and the funding fee clearly, then compare a financed fee scenario against a pay at closing scenario for an informed decision.
- Ask your lender to confirm exemption status on your certificate if you receive qualifying benefits, then have them update disclosures immediately so your costs reflect the correct funding fee bracket or exemption.
- Revisit the estimate after framing and mechanical milestones, then update totals and disclosures so the final closing disclosure matches the actual budget and you avoid corrections at conversion or after funding.
What pitfalls should you plan for, and how do you keep the schedule on track
Most delays come from missing documents, schedule slips, or inspection issues, plan buffers and stay organized. The VA publishes checklists used by staff appraisers and reviewers for Minimum Property Requirements, a useful lens for avoiding rework and delays caused by items that fail safety, sanitation, or structural standards during construction and appraisal VA basic MPR checklist.
- Assign a single point of contact for inspections and draws, then commit to one business day response standards for questions and document requests, organized communication prevents small issues from becoming serial delays across multiple trades and milestones.
- Maintain a modest contingency allowance and be ready to substitute reasonably equivalent materials when supply timelines shift, this flexibility can keep the project inside your lock window and avoid costly extensions that strain your budget unnecessarily.
- Walk the site after each milestone so punch list items are fixed before the next trade begins work, early corrections reduce expensive rework and prevent inspection failures that can delay draw releases and cascade into later schedule impacts.
- Hold weekly check ins with your lender and builder, update the shared calendar, and resolve open items promptly, consistent rhythm and visibility keep momentum and reduce last minute scrambles that add stress and cost.
- Keep all invoices, lien waivers, inspection reports, and approvals in a shared folder, labeled and dated, so every stakeholder can retrieve the exact document needed to release funds or verify progress immediately when asked.
- Before final draw, confirm occupancy items, insurance, title updates, and payment start date for the permanent terms, then schedule signing logistics and move in to satisfy primary residence requirements within the acceptable timeframe confidently.
| Feature | One time close | Two time close |
|---|---|---|
| Closings | Single closing for construction and permanent mortgage | Separate construction closing and later permanent closing |
| Costs | Lower total fees from avoiding duplicates | Higher total fees from second settlement |
| Rate | Locked upfront for certainty | Chosen at completion for flexibility |
| Administration | Simpler coordination, fewer document sets | More coordination, more documents, more timing risk |
The Bottom Line
A one time VA construction loan turns a complex build into a single approval and single closing. You lock your rate, you make interest only payments during construction, then convert to principal and interest without a second settlement. Licensed builder participation, warranty coverage, and Minimum Property Requirements remain essential. Many borrowers finance the funding fee, exemptions exist. Start with your certificate, choose experienced partners, maintain a shared calendar, and keep documents clean to protect schedule, costs, and final conversion.
References used, One Time VA Construction Loans, How They Work
- U.S. Department of Veterans Affairs, purchase loan overview and occupancy
- U.S. Department of Veterans Affairs, VA Home Loan Buyer Guide, construction to permanent context
- U.S. Department of Veterans Affairs, VA Lenders Handbook, construction responsibilities and documentation
- U.S. Department of Veterans Affairs, Construction and Valuation, appraisals, inspections, and Notice of Value
- U.S. Department of Veterans Affairs, how to request or retrieve a Certificate of Eligibility
- U.S. Department of Veterans Affairs, funding fee and allowable closing costs
- U.S. Department of Veterans Affairs, basic Minimum Property Requirements checklist
Frequently Asked Questions
Can I use a one time VA construction loan with zero down
Often yes. Many eligible borrowers can finance one hundred percent when income, credit, residual income, and the appraised finished value align. Lenders still verify reserves and project feasibility to ensure the structure fits your budget comfortably after conversion.
What payments do I make during the construction phase
You typically make interest only payments on funds already drawn, not on the full approved amount. This approach smooths cash flow during building and is replaced by regular principal and interest payments after completion and formal conversion.
Can I be my own general contractor for a one time VA close
Generally no. The program expects a licensed insured builder who provides warranty coverage, inspection access, lien releases, and documentation. Owner builder requests rarely meet lender and investor requirements, and most lenders will not approve that structure.
How is the appraisal performed for a house that is not built yet
The appraisal uses your plans and specifications and compares them to similar completed homes in the area. The finished value anchors the loan amount and informs closing, draw oversight, and the final conversion to the permanent mortgage payment.
Will I need a second closing when the home is finished
No. The loan converts to the permanent VA mortgage after final inspection, title update, and required documents. You do not sign a second set of closing papers, which helps reduce fees and reduces scheduling risk significantly for most borrowers.
What happens if costs rise during construction
Your lender will require documented change orders and may request updated appraiser review. If the finished value does not support higher costs, you may need additional cash or scope changes. Planning contingencies upfront helps absorb modest increases without stress.
Can I include the funding fee and soft costs in the loan amount
Often yes, when policy and underwriting allow. Many borrowers finance the VA funding fee and eligible soft costs, which preserves cash for reserves. Weigh this against a larger balance and confirm details on your official loan estimate and disclosure.
How long does the process take from approval to permanent conversion
Timelines depend on permits, weather, material lead times, and contractor availability. A complete packet and a realistic calendar shorten approvals and inspections. Weekly coordination among lender, builder, and title keeps draw releases timely and protects your rate lock.
Is a one year builder warranty required on new construction
Yes, or an insured ten year plan that meets program standards. Warranty coverage protects consumers, supports lender confidence, and can help resolve workmanship issues after move in. Provide the warranty plan with your initial documentation to avoid delays immediately.
Can I use this loan for a second home or investment property
No. VA construction to permanent financing is for a primary residence. You will certify occupancy within an acceptable timeframe, and lenders verify that the finished property is your main home rather than a vacation house or rental investment.
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