With the availability of existing homes hovering at historic lows, more buyers are inquiring about new construction. A VA end loan could be an attractive option for a new home build due to the benefits it offers over a conventional loan. VA end loans are available to active-duty service members, veterans and eligible surviving spouses. Last year, loans backed by the Department of Veterans Affairs (VA) were used to purchase more than 400,000 homes in the U.S.,1 with a total loan value of $153.2 billion.
According to research from Redfin, newly built single-family properties comprised more than 30% of housing inventory2 nationwide during second quarter 2023 – nearly triple the usual amount. And the National Association of Realtors (NAR) is predicting rising demand for new homes. The association expects new home sales3 to rise 12.3% in 2023 and 13.9% in 2024 as builders ramp up construction and offer more incentives to attract buyers.
What is a VA end loan?
VA mortgages are loans backed by the Department of Veterans Affairs. A VA end loan mortgage allows an eligible client to build a new home with an established production builder and then purchase that home upon completion. It can be used to purchase a new single-family home, townhome or condo.
Production builders own the land and are typically building at volume, such as an entire subdivision or neighborhood within a community. They offer select floor plans and home designs and may give buyers the option to purchase a home that is not yet underway, is already under construction or was recently completed. Production builders pay for the initial costs to buy the land and build the home, which means the homebuyer doesn’t need to secure a construction loan. When construction is complete, the homebuyer can obtain the end loan mortgage to purchase the completed house, townhome or condo.
Connect with a mortgage loan officer.
To learn more about how a VA end loan may help your eligible homebuyers, contact one of our experienced mortgage loan officers. They’re knowledgeable about VA end loans and can provide detailed information regarding the process, eligibility and requirements.
What are the advantages of a VA end loan?
A VA end loan is an attractive alternative to consider, as it may offer benefits that are more flexible than a conventional loan and provide a pathway to owning a newly built home. Key features include:
- Low or no down payment at closing: According to the VA, nearly 90% of VA-backed loans4 are made with no down payment.
- No mortgage insurance requirement: Because the VA guarantees a portion of the loan, a VA end loan does not require mortgage insurance.
- A simplified approval process: VA end loans were designed to offset common financial challenges faced by military families and veterans, and to simplify the approval process.
Who’s eligible for a VA end loan?
To be eligible for a VA end loan, the homebuyer must be an active-duty or former member of the armed forces with at least one of the following:
- 90 days of consecutive service during wartime
- 181 days of service during peacetime
- Six years of service in the National Guard or reserves
In addition, spouses of service members who died in the line of duty or as the result of a service-related disability may be eligible for a VA end loan. More details on eligibility can be found on the Department of Veterans Affairs website.
Five facts to help you navigate VA end loans
Understanding key facts about VA end loans can help homebuyers and realtors navigate the loan process.
- The homebuyer will still need to meet the required credit and income hurdles necessary to qualify for the loan amount they want to borrow.
- The homebuyer must obtain a certificate of eligibility (COE) to prove they are eligible. A mortgage loan officer can work with them to obtain the COE, which can also be used to get pre-approved for a VA end loan.
- The process for buying a production home should be the same as with a conventional loan, as long as the homebuilder accepts a VA loan pre-approval.
- A VA end loan must be used for a primary residence. It can’t be used to finance the purchase of an investment or rental property.
- An eligible homebuyer can use a VA loan multiple times to buy or refinance a home over the course of their lifetime.
U.S. Bank is dedicated to helping your clients land their new home.
U.S. Bank will work with you to get your clients into the home of their dreams.
We’re ready to work with you and your clients.
Our experienced mortgage loan officers are either in your neighborhood or just a phone call away.
Disclosures
Equal Housing Lender