How to Get a VA Construction Loan in Florida: A Complete Guide

Getting a VA construction loan in Florida can help eligible veterans and servicemembers build their dream home With a VA construction loan, you can purchase land and construct a new home tailored to your needs without making a down payment in most cases.

However, VA construction loans are not offered by all lenders, and the process can be more complex than getting a standard VA mortgage. In this comprehensive guide, we’ll walk through everything you need to know about getting a VA construction loan in the Sunshine State.

Overview of VA Construction Loans

VA construction loans are short-term loans issued by private lenders that are guaranteed by the Department of Veterans Affairs. They allow eligible borrowers to finance the construction of a new home that will become their primary residence once complete.

Here are some key features of VA construction loans:

• No down payment required – Like standard VA loans, VA construction loans do not require a down payment in most cases. This makes it easier for veterans to afford building a custom home.

• No private mortgage insurance (PMI) – Because VA loans don’t require a down payment, there is no PMI requirement. This helps reduce monthly costs.

• Short-term financing – VA construction loans provide financing through the completion of construction. Once the home is finished, the construction loan must be replaced with permanent financing.

• Construct to suit – VA construction loans allow you to build a home customized to your specifications on land you already own or purchase

• One-time or two-time close – Construction loans can be structured as either a one-time or two-time close. With a one-time close, the construction loan and permanent mortgage loan are wrapped into one.

VA Construction Loan Requirements

To qualify for a VA construction loan in Florida, you’ll need to meet the standard VA loan requirements:

• Be an eligible veteran, servicemember, or surviving spouse
• Have sufficient income and credit to qualify
• Occupy the home as your primary residence

You’ll also need to meet additional requirements specific to construction loans:

• Find a VA-approved builder
• Provide complete construction plans and specifications
• Have the project appraised based on the plans before closing
• Get a final inspection once construction is complete

The builder you choose must be registered with the VA and have a valid VA Builder ID number. The VA maintains a registry of approved builders that you can search.

The VA Construction Loan Process

Getting a VA construction loan involves several key steps:

1. Get prequalified – Work with a VA lender to get prequalified and determine your budget and loan amount. Not all lenders offer VA construction loans, so make sure to ask upfront.

2. Find land or a lot – If you don’t already own land to build on, the next step is finding a suitable lot. In some cases, the land purchase can be included in the construction loan.

3. Select a builder – Find a registered VA builder you want to work with and get a price estimate on construction costs. Provide their VA Builder ID to your lender.

4. Provide plans/specs – Work with your builder to put together detailed construction plans and specifications. These must be submitted to your lender as part of the loan application process.

5. Appraisal – The lender will order an appraisal of the project based on the plans and specs. The appraised value can’t exceed what the VA allows in your area.

6. Loan approval – The lender will underwrite and approve the construction loan once the appraisal is back. Closing typically occurs before construction begins.

7. Construction – After closing, the builder can begin construction. The lender will dispense payments (“draws”) at intervals over the course of the project based on completion of certain milestones.

8. Final inspection – When construction is complete, a final inspection must be done to ensure everything was completed according to the approved plans.

9. Permanent financing – Once construction is finished, you must replace the construction loan with permanent financing. This is usually done by getting a standard VA mortgage.

Transitioning to Permanent Financing

One thing to keep in mind is that VA construction loans are short-term financing. Once your home is completed, you’ll need to obtain permanent financing.

There are two main options for securing permanent financing:

VA Cash-Out Refinance – You can cash-out refinance the construction loan into a permanent VA mortgage once construction is finished. The benefit is you may be able to take equity out to cover any cash you put into the project.

VA Purchase Loan – Alternatively, you can pay off the construction loan entirely and get a new VA purchase loan for the full appraised value of the completed home. This avoids paying closing costs twice.

Either way, you’ll go through a standard mortgage approval process once construction is done. Most lenders recommend starting on permanent financing 60-90 days before completion.

Tips for Getting Approved

Here are some tips to boost your chances of getting approved for a VA construction loan in Florida:

• Shop lenders – Not all lenders offer VA construction loans, so shop around to find one that does. Ask about their specific requirements.

• Get prequalified – Getting prequalified will help you understand what you can afford to spend on construction. Aim for a 20-25% contingency above the estimate to cover overages.

• Boost credit – Construction loans require very good credit. Aim for a score of at least 680. Pay down debts and correct errors to improve your profile.

• Save for overages – It’s common for construction costs to exceed estimates. Have extra cash saved to cover additions or changes that pop up during building.

• Hire a quality builder – Work with an experienced VA-approved builder with positive reviews. Get everything in writing upfront.

• Start permanent financing early – Don’t wait until the last minute. Give yourself 90+ days before completion to apply for your permanent VA mortgage.

Pros and Cons of VA Construction Loans

VA construction loans offer some nice perks but also come with downsides to consider:

Pros

• No down payment required in most cases
• Build a custom home tailored to your needs
• Potentially lower interest rate than conventional construction loans
• Avoid private mortgage insurance (PMI)

Cons

• More complex process than buying an existing home
• Not widely available – fewer lenders offer them
• Short-term financing – must be replaced once home is built
• Cost overruns common during construction

Overall, VA construction loans can be a great option if you’re eligible and willing to take on the process of building a home from the ground up. Just make sure you understand the time commitment and risks involved.

Alternatives to VA Construction Loans

If you are having trouble finding a lender willing to do a VA construction loan, there are some alternative options:

FHA construction loan – FHA offers a similar construction loan program that may be easier to obtain. You’ll likely need a 3.5% down payment and pay PMI.

Conventional construction loan – Some lenders offer portfolio construction loans that don’t conform to agency standards. Often requires 10-20% down.

Owner-builder construction – If you act as the builder yourself, you may be able to get a permanent VA loan once the home is complete. This avoids the construction loan.

USDA Rural Development loan – For eligible properties in rural areas, USDA RD loans can finance construction with 100% financing and no PMI.

Renovation loan – FHA and VA also offer renovation loans that let you buy and rehab a home in one loan. Limited to existing structures.

While less ideal than a VA construction loan, these alternative mortgages may be worth considering if you have your heart set on building a custom home.

Finding a VA Construction Lender in Florida

The first step is making sure the lender you choose offers VA construction loans in Florida. Here are some places to start your search:

• Ask your real estate agent for recommendations
• Check with banks and credit unions you have relationships with
• Search lender listings on the Veterans United website
• Look for VA-approved lenders located in Florida
• Compare interest rates and terms from multiple lenders

Some of the more active VA construction lenders in Florida include Veterans United Home Loans, Navy Federal Credit Union, Guaranteed Rate, and LoanDepot.

Be sure to ask potential lenders about:

• Their construction loan program guidelines
• Allowable property types, loan sizes, and term lengths
• The construction draw process and inspection requirements
• Options for permanent financing once the home is complete

The VA doesn’t set any geographic restrictions on where you can get a VA construction loan. Working with an experienced, trustworthy lender familiar with construction lending in your area is key.

Steps for Building on Land You Already Own

If you already own a vacant lot or land you want to build on,