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Hello, I am Terell Brown, MBA. I wear many hats, but among other things I am a United States Marine, Investment Banker, and Real Estate Developer of Veteran housing. I am also the President of Garrison For Veterans. OORAH!
Thank you for taking the time to read this article. I am delighted that people find Garrison For Veterans’ information relevant and useful. We appreciate your support.
In my last article on the VA Construction Loan, I discussed questions many people have: “What is the VA Loan?”, “What can you purchase with the VA Loan?”, and “What is a construction loan?”
"I would like to further discuss additional frequently asked questions that people have about the VA Construction Loan."
Unfortunately, I cannot cover all questions in this one article. There presumably could be books written on all the questions that come up. However, I would like to cover a few very important topics. Please subscribe to our website to be notified of all future VA Construction Loan content.
So let’s begin.
1. Do you have to own land?
The first step to land development is site control. What is site control? Site control gives you the proper interest in a site which will allow you to plan, perform, and complete your development at a specific location should you decide to carry out your plan. You will need site control to perform due diligence for your home build and to begin construction.
If you own the land, that is great! You have a site in need of a development concept. You will most likely want to first see if you can use the land, you already own to suit your purpose. Since you already have site control, you are one step ahead. You can proceed with site analysis. Consider the highest and best use of the land. After careful analysis you may find that the land you own is not suitable for a home or may be better suited for other uses in which case you will need to find another site.
Everyone’s development ideas will have different requirements. Begin with the end in mind. Site selection depends on intended use and if that use is compatible with the site. You may want to build a home on a site, but the land is zoned commercial which doesn’t allow for residential development. Does the site allow for the intended use?
If you do not own land, be encouraged! You have a development idea in need of a site. You will need to identify a site that is appropriate for you and your idea. Once a site has been selected you will need to establish site control to proceed with your analysis. The VA Construction Loan will allow you to purchase the land and build your home at the same time.
Looking for land?
2. What can I build?
When you are building with your own cash, you certainly have a bit more freedom and flexibility to express your creative uniqueness than when you are using the VA Construction Loan. When using the VA Construction Loan, lenders typically want you to build a traditional home. A traditional home is a detached, single-unit, single-family residence that is similar in size, characteristics and cost to the properties that are already in the area. This means that tiny houses, container homes, barndominiums, log cabins, duplexes, triplexes, and quadplexes are all out. If you would like to develop a multi-family home, please book an appointment. You may be a good candidate for other options. We would love to discuss your plans further. Additionally, homes with excessive land or costs that grossly exceed the cost of similar homes in the area are out as well.
3. Can I build the home myself?
Many people looking to utilize their VA Construction Loan are thinking about cutting costs. The idea is that if you can perform some of the work you can cut some labor costs and ultimately reduce the cost of the home. This is not where you will save costs as you are not able to do this. The builder must be an approved, licensed, and insured General Contractor. Self-builds are not allowed. The GC must be approved by the VA and in most cases by the lender as well. The builder approval process for builders who are not approved is typically not too much of an arduous process, but it must be done to secure the financing. If you are looking to save on cost, contact us. We are creative. Plus we have tried and true methods of reducing development costs the right way. We will help you to maximize that bang for your buck.
4. I thought the VA Construction Loan was 100% financing?
"Remember, no site is completely free of conditions that may present a constraint to your project."
Those eligible for the VA Construction Loan can receive up to 100% financing. 100% financing has to do with Loan-to-Value or LTV. Lenders will finance VA Construction Loan amounts up to 100% of the underlying home’s value. This will result in no down payment. However, it should be noted that there are other pre-development expenses you are likely to incur. Pre-dev costs are expenses you will have to cover out-of-pocket before you are able to close on your financing. You will need a budget for(including but not limited to): due diligence to determine buildable and unbuildable land areas, project designs, and regulatory fees. Home development is risky business. It is possible to spend time, money and other resources on a site that is not buildable. Remember, no site is completely free of conditions that may present a constraint to your project.
I'm going to stop here for now. I hope this article has provided some food for thought. Are you considering the VA Construction Loan for your next home build? Let’s discuss your additional questions. We want to help you take the risk out of a complex home development.
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