# VA construction loan in Virginia: how a one-time close works Source: https://nobullshitloans.com/loans/construction/ By Tyler Rood, Loan Officer, NMLS ID # 2064776, Edge Home Finance, LLC (NMLS ID # 891464). Updated 2026-11-09. ## The short answer A VA one-time close construction loan is one loan with one closing that covers the land, the build, closing costs and construction interest, then converts to your permanent VA mortgage. You qualify once, and with full entitlement it can finance up to 100% of the appraised value, though you still need cash for closing costs that credits don't cover. The lender approves the builder first, and the rate at the end depends on the program. Building sounds like three loans, two closings and a construction payment on top of your rent. A one-time close is built to avoid that. Here is how a VA one-time close construction loan works in Virginia, step by step, including the three places these files get stuck: the builder, the appraisal and the rate at the end. ## How a VA one-time close construction loan works One loan, one closing, one set of closing costs. The loan covers the land (if you are buying it), the build, closing costs and the interest that builds up during construction. It is underwritten once, before anyone breaks ground, on today's income, assets and credit, like a regular purchase. When the house is finished, the same loan is modified into your permanent mortgage, which is why it is also called a construction-to-permanent loan. No second closing, no second round of fees. The construction lenders I work with offer conventional, FHA and VA versions. All require a licensed builder (no self-builds), and only VA can go up to 100%. ## Building a house with a VA loan: what stays the same - **Entitlement sets your zero-down ceiling.** With full entitlement VA sets no loan limit, though you still have to qualify and the loan cannot exceed the appraised value. If some entitlement is tied up in another VA loan, the ceiling is lower and most lenders want 25% of the amount above it as a down payment. The math is in [how VA entitlement works](https://nobullshitloans.com/veterans/va-entitlement/). - **The funding fee follows the purchase table:** 2.15% on first use with less than 5% down, unless you are exempt. See [the VA funding fee](https://nobullshitloans.com/veterans/va-funding-fee/). - **Everything counts toward the total.** Land, the build, the interest reserve, the construction fee and any closing costs rolled in all have to fit under the ceiling. ## One-time close construction in Virginia: the order of operations We need the builder before the land. You cannot do anything with raw land until you have a builder, because the builder's price sizes the loan. Land cost plus construction equals total cost. 1. Get pre-approved on construction numbers: a maximum total for land plus build, and the cash you would bring. 2. Pick the builder and the land together if you can. 3. Get the builder registered with the lender (background report, trade references, license, insurance). Do it early. A strong builder can be approved the day the documents arrive. 4. The builder sends plans, specs and a contract, and the lender's worksheet comes back with your total loan amount in a few days. 5. Underwriting runs like a normal loan, plus a third-party construction administrator's review of the builder and budget. 6. The appraisal is ordered on the plans, subject to completion. 7. One closing, before construction starts. 8. The build, with the builder paid in draws after inspections. 9. The modification into your permanent loan when the house is done. If you are buying land, my rule is to write that contract with at least a 45-day closing, 60 if you can get it: the first weeks go to the builder, plans and budget, and the lender still needs a full 30 days. For the whole project, plan on about 12 months from the day you identify land and builder. **Buying land and building, start to finish** Give the land contract at least 45 days, give the build a 50% cushion, and plan on about 12 months for the whole project. 1. Day 0: Land and builder picked. Write the land contract with at least a 45-day closing, 60 if you can get it. 2. First weeks: Builder, plans and budget. The builder gets registered with the lender and sends plans, specs and a contract. The lender's worksheet with your total loan amount comes back in a few days. 3. Final 30 days: Underwriting and the appraisal. The lender needs a full 30 days. The appraisal is ordered on the plans, and in my files the report takes about 10 days. 4. Day 45 to 60: One closing. Before construction starts, with builder's risk insurance bound. 5. After closing: The build. A simple house with a turnkey builder in the Richmond area takes about six months, so I plan on nine. The builder is paid in draws after inspections. 6. About month 12: Modification into your permanent loan. The same loan becomes your permanent mortgage, with no second closing. ## Do I make payments while my house is being built? On the VA one-time close programs I have used, no. There is no out-of-pocket monthly payment during construction. The loan closes for the full amount, but the builder is paid in draws as work is finished and inspected, and interest accrues only on money actually drawn. That interest was budgeted into the loan up front as an **interest reserve**, and the lender pays it from there. In the VA program I have used, if the reserve runs short the lender can start billing you, and whatever is left at the end goes to your principal. Choose a 12-month term, finish in nine, and the unused reserve comes off your balance. Nobody can tell you the exact interest up front; it depends on how fast the money goes out. On some conventional one-time close loans you pay interest only on the drawn balance each month, so ask which way yours works. ## How long do you get to build, and what if the builder runs late? Build terms vary by lender, and a build that runs past its term can bring an extension fee. My rule of thumb: take the builder's realistic time and add a 50% cushion. A simple house with a turnkey builder in the Richmond area takes about six months, so I plan on nine. The lock follows the same logic. On one file a 12-month lock cost about a quarter point more in rate than a 9-month lock, so with a builder who averages six months, I locked nine. Slow but secure. ## What happens to the rate when the house is done? The lock carries a construction premium: the lender holds market risk for up to a year and hedges it, so the starting rate runs higher than a regular purchase rate. At completion, depending on the program: - **Float-down at modification.** The rate drops to the market rate at that time, and your locked rate works as a ceiling. You qualify at the locked rate, and it is not an adjustable-rate mortgage. Some programs do this free if you are current, others set their own conditions, and nobody can promise how far it drops. - **No float-down.** You carry the closing rate, then refinance once the permanent loan has enough payment history, usually with a [VA streamline refinance (IRRRL)](https://nobullshitloans.com/refinance/va-irrrl/). If you carry it, the higher starting rate can be a temporary beating. Decide on any points before your disclosures go out, and get the lender's answer on float-down in writing. For locks in general, see [rate locks](https://nobullshitloans.com/buy/rate-lock/). ## When is the appraisal ordered on a house that is not built yet? The appraiser values the finished house, subject to completion, from the plans, specs and contract. There is no skipping it on a conventional build: Fannie Mae's appraisal waiver excludes proposed construction and construction-to-permanent loans. On a bare lot, the paperwork is the house, so the order waits until the contract and specs are final, or the value can miss upgrades added later. In my files the report takes about 10 days. The bank cares about anything that changes value: granite, a generator, siding, a garage. Land clearing, tree decisions and a plat correction do not move it. Write every upgrade into the contract and send the plans and specs together. Then watch for this trap: **Worked example: What the appraisal has to support on a land-plus-build loan** - Lot: $50,000 - plus Builder's base price: $450,000 - plus Interest reserve, construction fee and closing costs in the contract: $50,000 - equals: Loan the appraisal has to support: $550,000 Note: If the appraiser sees only the $450,000 house contract, the value can come in near $450,000, and a VA loan cannot exceed the appraised value. _Hypothetical round numbers. Every lender builds its own worksheet._ **Chart: The whole stack vs the house contract alone.** If the appraiser sees only the $450,000 house contract, the value can come in about $100,000 short of the loan. | | Part | Amount | |---|---|---| | Loan the appraisal has to support | Lot | $50,000 | | Loan the appraisal has to support | Builder's base price | $450,000 | | Loan the appraisal has to support | Interest reserve, construction fee and closing costs | $50,000 | | Loan the appraisal has to support | Total | $550,000 | | If the appraiser sees only the house contract | Builder's base price | $450,000 | | If the appraiser sees only the house contract | Total | $450,000 | _Hypothetical round numbers, not a quote. Every lender builds its own worksheet._ I have watched an appraisal match only the base-house contract because the appraiser never saw the land and financing costs as one transaction. The fix: when the price changes, get a fresh worksheet from the construction lender, update the builder contract and addendum to match it, land included, and give the appraiser the fully worked-up contract. The appraiser has to see the whole stack. **Watch out** If the value still will not support the total, the loan stops at the supported value. Your choices are a smaller plan, removing a builder credit, or bringing the difference in cash. Changing lots means a new appraisal, because the appraisal is tied to the address. VA's own appraisal rules are in [VA appraisals](https://nobullshitloans.com/veterans/va-appraisal/). ## Buying the lot: a land loan or a HELOC I steer people away from raw land loans. In my experience they mean a much bigger down payment, a higher rate and a shorter term. If you own a home with equity, a [HELOC on the home you live in](https://nobullshitloans.com/refinance/heloc/) usually costs less: your first mortgage stays untouched and you pay interest only on what you draw. Lenders will not put a HELOC on raw land itself, and the application has to say truthfully what the money is for. Land you already own free and clear can work as collateral, and often as part of your down payment. How much it counts is the lender's call, so get that answer first. ## What to expect at closing, and after Closing happens once, before construction starts. You bring the down payment, if any, and the closing costs not rolled in or covered by credits. On the VA program I have used there is no prepaid interest at closing, and the lender charges one construction fee inside the loan instead of separate draw and inspection fees. Ask every lender how its fees are built. Builder's risk insurance has to be bound for closing. After that, the only signing left is the modification at the end, with the title company or closing attorney. The builder is not involved. During the build, track every dollar you pay the builder for upgrades, because they go plus, plus, plus. And budget property taxes on the finished house, not the first estimate: the county has not valued a brand-new home yet, so early figures run low. On my own first new build, the tax line started around $15 a month and jumped to about $180 once the house was assessed. More in [Richmond-area property taxes and escrow](https://nobullshitloans.com/virginia/property-taxes/). If the builder is offering incentives to use its own lender, run the comparison in [mortgage broker vs bank](https://nobullshitloans.com/loans/broker-vs-bank/) first. Very rarely does one plus one equal two in that math. ## Barndominiums, modular and manufactured homes A barndominium can be financed with a construction loan, but the hurdle is comparable sales. The appraiser needs recent sales of similar homes, and the Richmond area does not have many yet. Modular and manufactured homes have to be real property: you own the land, and the home sits on a permanent foundation that meets the loan program's standards. A manufactured home also needs title work that converts it to real estate, and it carries rules on the HUD label and build date, so check before you fall in love. Building to rent? My advice is stick-built. ## Renovation loans: rolling repairs into the mortgage "It depends" is the answer you will hear most. Repairs only go into a mortgage when they are built into the deal, written into the sales contract and the loan structure, and that kind of purchase takes longer: in my files, closer to 60 days than 30. FHA's 203(k) is the best-known rehab loan. Yes, we can do them. No, I don't recommend it for most buyers. The program and the lender have a say in who does the work and how they get paid. Doing any of it yourself takes a separate self-help agreement and inspections, and the paperwork is a whole headache and a half. Either way, price the repairs first. An independent home inspection, usually $300 to $500 in my files, tells you what is wrong; the appraisal only tells the lender what the house is worth. And if it is a couple thousand dollars of shelving and paint you would enjoy doing yourself, why mortgage it? Building rewards the buyer who lines things up early: the builder registered, the land contract long enough, the appraiser seeing the whole stack. Get those three right and a one-time close is a clean way into a brand-new house. ## Frequently asked questions ### What insurance do I need before closing on a construction-to-permanent loan? Builder's risk and then homeowners coverage. Builder's risk covers the materials and structure while the house goes up, and it has to be bound for closing. Once the house is finished and has its occupancy permit, a regular homeowners policy takes over, either a separate policy or a combination policy that converts on its own. ### Can a construction loan really cover the land, the build, closing costs and interest at 100%? On a VA one-time close with enough entitlement, it can, as long as the appraisal supports the whole number. Conventional and FHA versions need a down payment. ### If I sell my old house when the build finishes, can I use the money to lower my payment? Not by itself. The terms are set at the one closing, so a lump sum lowers the balance but not the payment until you recast (if your servicer offers it) or refinance once the permanent loan has some history. A two-closing structure lets sale money go in sooner, but it usually gives up the 100% financing. ### Do I need my lender's permission to split off a lot from land I already have a mortgage on? Yes. Before any deed is signed, the mortgage servicer has to consent and release its lien on that lot, or whoever builds on it will not be able to get construction financing. Expect a survey, perc test, county filings and attorney-drawn deeds first. ## Sources - [U.S. Department of Veterans Affairs, VA funding fee and closing costs](https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/) - [U.S. Department of Veterans Affairs, VA home loan limits and entitlement](https://www.va.gov/housing-assistance/home-loans/loan-limits/) - [Fannie Mae Selling Guide B4-1.4-10, value acceptance (appraisal waiver)](https://selling-guide.fanniemae.com/sel/b4-1.4-10/value-acceptance-appraisal-waiver) - [HUD, 203(k) Rehabilitation Self-Help Agreement (sample)](https://www.hud.gov/sites/documents/sfh_203k_samp_selfhelp.pdf) ## Disclosures Individual Originator: Tyler Rood, Loan Officer, NMLS ID # 2064776 (www.nmlsconsumeraccess.org). Licensed in NC, PA, TX and VA. Edge Home Finance, LLC | NMLS ID # 891464 | www.nmlsconsumeraccess.org. Licensed in all U.S. states & D.C., EXCEPT New York. Edge Home Finance, LLC is a mortgage broker, not a direct lender or creditor. Virginia Broker License MC-7006. North Carolina Mortgage Broker License B-201539. Pennsylvania Mortgage Broker License 81041. Texas: Mortgage Company License, Department of Savings and Mortgage Lending. Numbers on this page are illustrations, not offers. Any rate shown on this site is an example. Rates may change or may not be available at the time of loan commitment or lock-in. Edge Home Finance, LLC is a private mortgage broker and is not affiliated with, endorsed by, or acting on behalf of or at the direction of the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), or any other government agency. We do business in accordance with the Fair Housing Act and the Equal Credit Opportunity Act.