Articles and news about VA loans and HUD requirements. VA loans are a great way to buy a home with no down payment.

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.

6 Responses to VA Loans: New Construction Loans vs. Existing Construction

  1. Sharon Cales says:

    Im looking for the forms required to get builder VA approved

  2. Dennis Gowey says:

    I am looking for information about a VA remodel loan. I recently paid off my only VA loan. I want to do a major remodel on a property that is paid off. Do you have any information or could you guide me in the right direction to advance my research.

    • Joe Wallace says:

      Though technically the VA does not offer a guaranty for a “remodel loan” it does offer refinancing loans that feature cash back to the borrower for any purpose suitable to the lender including home improvements. In your case it the refinancing option isn’t really applicable since you’ve already paid off the loan, but I would call the Department of Veterans Affairs at 1-800 827 1000 to ask for some advice in your specific circumstances.

  3. PATTY says:

    MR WALLACE, BOTH MY HUSBAND AND I ARE VETERANS AND ARE PLANNING ON BUILDING A HOME ON OUR FARM IN RURAL MISSOURI. IF WE PLAN ON DOING MOST OF THE WORK OURSELVES DO WE STILL NEED TO HAVE A VA BUILDER IN ORDER TO GET A VA GUARANTEED CONSTRUCTION LOAN? THANKS

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