VA Loans: New Construction Loans vs. Existing Construction
VA loans for new construction homes have different requirements than VA mortgages for existing construction purchases. In a troubled housing market, some lenders don’t see as much demand for new construction loans, and in today’s housing market some lenders have stopped issuing them altogether, waiting for the uncertainty to pass before taking a chance on new construction VA home loans.
Since many VA loan applicants aren’t interested in new construction VA loans, why should people bother to understand the rules that cover them?
New construction loan rules normally don’t affect the buyer interested in purchasing existing construction property. For example, new construction properties have specific rules about builder’s warranties. Existing construction homes are sold as-is–the buyer must insure the home they purchase meets their expectations.
Knowing the difference between what the VA considers “new” versus what the VA considers existing construction is quite helpful. Just because a building is brand new and less than a year old does not mean it counts as a new construction property. To a first time home buyer that property may look, smell and feel like brand new construction, but there’s one very important qualifier that makes all the difference in the eyes of the Department of Veterans Affairs.
Once a building has been purchased and occupied, it is no longer classified as “new construction” by the VA. A one-owner property is classified as existing construction regardless of how long the original ownership period lasted. If a buyer has a condominium built, for example, and suddenly needs to sell the home or have the loan assumed, even in the first year of ownership, once the VA borrower comes along and makes an offer, they are making an offer on existing construction.
Even when the building seems brand new, the buyer should not neglect an independent home inspection by a qualified inspector. The trained eye of a professional may catch defects not addressed or repaired during the original building project. All existing construction loans should be treated the same regardless of how new or old the property may be.
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.