VA loans for new construction homes?

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

brergnat said:

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

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Absolutely homebuilders absolutely are fine with buyers who finance via no down or low down VA loans.  The builder lenders (who are the gatekeepers for the builers) will need to pre-approve you or at the minimum you'll need to show them your own loan pre-approval in order to be able to select a lot, but you are not obligated to use them for your loan.  You will have issues on the resale side because the market is so hot right now that sellers are sending out counters to buyers to remove appraisal contingencies and want to see that the buyers have enough cash to make up any appraisal shortfalls. 

USCTrojanCPA said:

Absolutely homebuilders absolutely are fine with buyers who finance via no down or low down VA loans.  The builder lenders (who are the gatekeepers for the builers) will need to pre-approve you or at the minimum you'll need to show them your own loan pre-approval in order to be able to select a lot, but you are not obligated to use them for your loan.  You will have issues on the resale side because the market is so hot right now that sellers are sending out counters to buyers to remove appraisal contingencies and want to see that the buyers have enough cash to make up any appraisal shortfalls.

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Thank you! I prefer new homes anyway. Our rental was a new home when we moved into it in 2015. Love being the first one to live in a place.

Now just trying to decide if we want to almost double our monthly housing payment in order to own a home. Not sure it's the best idea, but we *could* do it, financially.

Decisions, decisions.

brergnat said:

USCTrojanCPA said:

Absolutely homebuilders absolutely are fine with buyers who finance via no down or low down VA loans.  The builder lenders (who are the gatekeepers for the builers) will need to pre-approve you or at the minimum you'll need to show them your own loan pre-approval in order to be able to select a lot, but you are not obligated to use them for your loan.  You will have issues on the resale side because the market is so hot right now that sellers are sending out counters to buyers to remove appraisal contingencies and want to see that the buyers have enough cash to make up any appraisal shortfalls.

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Thank you! I prefer new homes anyway. Our rental was a new home when we moved into it in 2015. Love being the first one to live in a place.

Now just trying to decide if we want to almost double our monthly housing payment in order to own a home. Not sure it's the best idea, but we *could* do it, financially.

Decisions, decisions.

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Yeah that's always a tough decision.  I've helped a few VA clients so I can refer you a few good VA lenders if you are interested, just PM me. Btw, thank you for your service!

brergnat said:

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

Click to expand...

I'm not sure if I read that right, but if you want to buy a home with 0% down payment, I would say you are not ready to buy a home. 3% down payment is also on the low side and you will be paying a big mortgage each month and a high funding fee. If you do not have sufficient money to buy a house, I wouldn't recommend doing so. I'm not sure how many months of emergency fund you have currently, but normally people recommend 6 months. I would personally recommend having enough for one year in the event covid-21 happens.

sleepy5136 said:

brergnat said:

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

Click to expand...

I'm not sure if I read that right, but if you want to buy a home with 0% down payment, I would say you are not ready to buy a home. 3% down payment is also on the low side and you will be paying a big mortgage each month along with PMI. If you do not have sufficient money to buy a house, I wouldn't recommend doing so. I'm not sure how many months of emergency fund you have currently, but normally people recommend 6 months. I would personally recommend having enough for one year in the event covid-21 happens.

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Not sure that you know how VA loans work.  VA loans offer veterans 0% down loans with no PMI at around the same interest rate as conforming loans. So why wouldn't someone borrow with a 100% VA loan for a home with such a low interest rate?  It's a well-deserved benefit for our veterans. 

There are additional closing costs to do a VA loan but yes I agree with the sentiment. If rates are low I personally would maximize leverage even if I could go 20% down. MAXIMIMUM ROI!

Cares said:

There are additional closing costs to do a VA loan but yes I agree with the sentiment. If rates are low I personally would maximize leverage even if I could go 20% down. MAXIMIMUM ROI!

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True that.
That is what I feel about fha loans.

USCTrojanCPA said:

sleepy5136 said:

brergnat said:

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

Click to expand...

I'm not sure if I read that right, but if you want to buy a home with 0% down payment, I would say you are not ready to buy a home. 3% down payment is also on the low side and you will be paying a big mortgage each month along with PMI. If you do not have sufficient money to buy a house, I wouldn't recommend doing so. I'm not sure how many months of emergency fund you have currently, but normally people recommend 6 months. I would personally recommend having enough for one year in the event covid-21 happens.

Click to expand...

Not sure that you know how VA loans work.  VA loans offer veterans 0% down loans with no PMI at around the same interest rate as conforming loans. So why wouldn't someone borrow with a 100% VA loan for a home with such a low interest rate?  It's a well-deserved benefit for our veterans.

Click to expand...

Its an additional funding fee. And from the looks of his initial post, he is putting the would be down payment $ to the bank. Which in a 0 interest rate is the worse. We also don?t know if his emergency funding is sufficient for a rainy day fund when you have a mortgage. 6 months of emergency funding for rent is not the same as 6 months of emergency fund for a mortgage

Cares said:

There are additional closing costs to do a VA loan but yes I agree with the sentiment. If rates are low I personally would maximize leverage even if I could go 20% down. MAXIMIMUM ROI!

Click to expand...

That would be true if he didn?t say ?We prefer to keep our savings liquid for emergencies?. So in this case that $ would be parked in the bank. Which would be negative ROI lmao

Just wanted to clarify a few things for the people "concerned" about finances.

First of all, I'm a she. I'm the spouse of an 0-5 ranked military officer with 22 years of active duty service. He will be retiring in about 2.5 years. Income is solid and guaranteed now and beyond. He cannot be laid off or lose his job.. He is guaranteed a military retirement at this point.

His retirement pension will begin immediately upon separation and he expects to receive significant VA disability pay as well. Our NET on just those things after he separates will be around $7-9k per month, with annual COL raises. He will have a second career as well, and expects to make around $150k at that job. I don't work now but likely will in the future once my kids are done with school.

Our plan is to use his pension for housing expenses and we are willing and able to use up to $6k per month towards that, which will be right around 40% of our gross monthly pay. As mentioned we have no other debt.

We have other investments in addition to the cash we have in savings. Those are long term investments though. Don't worry about us "losing" money on our cash savings. It's at least in a high yield account at this point. At our current savings rate, we will have around $120k when we are ready to buy. We'd like to keep $75k on hand as liquid savings going forward (to hedge against job loss at that second job) so we will have about $45k to use towards the home purchase. It would be foolish to throw all our cash towards a down payment.

RIGHT NOW, our income is around $175K, of which $48k is tax free income. We pay $3300 monthly in rent. We pocket $4000 after monthly expenses and investments. We can certainly spend more on our housing payment, even at this point. We live pretty frugally overall and don't see a situation where we are suddenly spending more per month than we do now.

We plan to stay in Irvine forever. We will buy a home with the assumption that we will never move again. We will be around 45 when we finally buy so are not concerned with the house as an investment, and don't really care about having equity in it early on.

We can certainly keep renting long term. We have a sweet deal going with our landlord, but the fact is the house we are in won't work for us long term. We have 2 disabled teens who will likely live with us well into adulthood and we need more space for that eventuality. They can't share a twin sized bunkbed forever. A larger rental would easily be $4500 month. Why not spend a bit more and just buy at that point?

sleepy5136 said:

USCTrojanCPA said:

sleepy5136 said:

brergnat said:

Do builders accept VA loans for purchases of new construction properties? Is this a viable option in Irvine? We qualify for a VA loan but know how difficult it can be to buy a resale home using this option. We don't have much for a downpayment (we could squeeze out 3% if absolutely necessary but would prefer zero down). Our lack of down payment $$$ is the largest obstacle we have. We prefer to keep our savings liquid for emergencies because we have no debt and want to keep it that way.

Now that VA has removed loan limits for people who have their full loan eligibility, we might actually have a chance to become homeowners.

Click to expand...

I'm not sure if I read that right, but if you want to buy a home with 0% down payment, I would say you are not ready to buy a home. 3% down payment is also on the low side and you will be paying a big mortgage each month along with PMI. If you do not have sufficient money to buy a house, I wouldn't recommend doing so. I'm not sure how many months of emergency fund you have currently, but normally people recommend 6 months. I would personally recommend having enough for one year in the event covid-21 happens.

Click to expand...

Not sure that you know how VA loans work.  VA loans offer veterans 0% down loans with no PMI at around the same interest rate as conforming loans. So why wouldn't someone borrow with a 100% VA loan for a home with such a low interest rate?  It's a well-deserved benefit for our veterans.

Click to expand...

Its an additional funding fee. And from the looks of his initial post, he is putting the would be down payment $ to the bank. Which in a 0 interest rate is the worse. We also don?t know if his emergency funding is sufficient for a rainy day fund when you have a mortgage. 6 months of emergency funding for rent is not the same as 6 months of emergency fund for a mortgage

Click to expand...

If it is their first VA loan, the funding fee for a 0% loan would be 2.15% vs. 1.25% if they put down 10% or more so that's a fairly easy decision to put as little down with as loan rates are.  If they want, they can bump of the interest rate by 1/8% and get enough lender credit to almost take care of the small delta in the fee.  VA and MD loans are great options for the folks who are eligible for them.

sleepy5136 said:

Cares said:

There are additional closing costs to do a VA loan but yes I agree with the sentiment. If rates are low I personally would maximize leverage even if I could go 20% down. MAXIMIMUM ROI!

Click to expand...

That would be true if he didn?t say ?We prefer to keep our savings liquid for emergencies?. So in this case that $ would be parked in the bank. Which would be negative ROI lmao

Click to expand...

8)

New or Resale, if the property is a Condominium, it's helpful to look up first if it's VA approved. Most are, but some are not.
[url]https://lgy.va.gov/lgyhub/[/url]

If New Construction it's always best to close with the builders preferred lender. No need to re-invent the wheel using an outside company, even if you might save X on your rate. The odds are high that an outside lender will not be able to structure a VA transaction in a timely manner.

If it's resale, VA isn't always an issue. Like any other sale, it's price - period - the end. If your offer price is what the seller wants, and some of the costs the Veteran is not allowed to pay are taken care of to the sellers satisfaction, a VA transaction is little different from any other (assuming a detached home. Item 1, the Condo look up, still applies if you are buying a Condo.)

My .02c

Soylent Green Is People said:

New or Resale, if the property is a Condominium, it's helpful to look up first if it's VA approved. Most are, but some are not.
[url]https://lgy.va.gov/lgyhub/[/url]

If New Construction it's always best to close with the builders preferred lender. No need to re-invent the wheel using an outside company, even if you might save X on your rate. The odds are high that an outside lender will not be able to structure a VA transaction in a timely manner.

If it's resale, VA isn't always an issue. Like any other sale, it's price - period - the end. If your offer price is what the seller wants, and some of the costs the Veteran is not allowed to pay are taken care of to the sellers satisfaction, a VA transaction is little different from any other (assuming a detached home. Item 1, the Condo look up, still applies if you are buying a Condo.)

My .02c

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Thank you for the info on condos. At this point we are looking at potentially attached units, or detached units classified as "condo" so this is useful information.

My concern with VA on resale homes is that often you need to offer over asking to even have a chance. The VA won't back a loan worth more than the appraised value of the home, so we would need to front the rest of the money over and above that, which could be significant. I have also heard that sellers don't like VA loans because they can take a long time and there are numerous inspections required, etc. Is that not the case?

I'd recommend looking at it this way - If this is a terrific home, one that fits your needs perfectly, but VA will only finance 98% of the deal because of a lower than expected appraisal, pay the 2% (or so) as you've got the home you want.

VA, handled by a professional loan officer, can be done as quickly as a Conventional loan.

Yes, the inspections are slightly deeper, but as a home buyer, that's not a bad thing.

A buyer's Realtor needs to be a better advocate on behalf of you, putting together more of a "pitch presentation" rather than mailing in an offer. The seller's agent should have a punch list presented - "this will be done, that will be done" etc so both the agent and the seller will be fully informed about expectations.

As long as a full time loan officer familiar with VA and a professional Realtor are working closely with you on the offer, it's likely to be accepted over others.

I hear that VA loans takes longer. Also the inspection is over the top like FHA loan.

eyephone said:

I hear that VA loans takes longer. Also the inspection is over the top like FHA loan.

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Depends on the lender and how quickly the buyer getting the information over to the lender.  Both of my VA transactions in the past 18 months closed in less than 30 days.

Just found out today that the VA funding fee is WAIVED for Veterans receiving disability compensation at any rating, which will definitely be the case once my husband retires. With that knowledge, we will not make a move to buy until after he is out. That is a good chunk of change that we will save. Plus, my husband pointed out that the military will pay for our last move after retirement so might as well stick them with that cost as well.

I am very appreciative of all the info provided so far.

brergnat said:

Just found out today that the VA funding fee is WAIVED for Veterans receiving disability compensation at any rating, which will definitely be the case once my husband retires. With that knowledge, we will not make a move to buy until after he is out. That is a good chunk of change that we will save. Plus, my husband pointed out that the military will pay for our last move after retirement so might as well stick them with that cost as well.

I am very appreciative of all the info provided so far.

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So is that this year or later?