With the VA OTC Construction Loan benefit, qualified active-duty and military Veterans can apply for a home mortgage loan to finance the construction of a new home. The VA One-Time Close (OTC) Construction Loan process is designed to simplify and expedite the home construction process for eligible Veterans by combining the financing for the lot, the construction phase, and the permanent mortgage into a single loan and a single closing.
Here is what you can expect from conversion to permanent loan, when Security America Mortgage is your lender:
Phase 1: Qualification & Pre-Approval
The initial steps are to determine the Veteran’s eligibility and ensure the builder and project qualify.
| Step | Summary | Security America Mortgage Focus |
| Application | Focus on submitting the initial mortgage application. | Expediting the pre-qualification process. |
| Provide COE | The Veteran’s Certificate of Eligibility (COE) shows their VA home loan entitlement. | Determine the Veteran’s entitlement to VA benefits. |
| Borrower Qualification | Review of the borrower’s financial situation, including income, credit score (typically 620+ FICO), and DTI ratio, to determine the maximum loan amount. | Utilizing automatic underwriting to expedite the pre-qualification process. |
| Builder Acceptance | The builder must meet VA standards and be approved by the lender. | Approving the builder based on the lender’s experience and financial stability requirements, using clear checklists and guidelines. |
| Contract & Budget | Borrower and builder establish a contract including the project budget plan (cost for lot purchase and/or cost to build the home). | Reviewing and approving all signed contracts and plans. |
Phase 2: The Single Closing
This is the important point of the “One-Time Close.”
| Process | Description | Security America Mortgage Focus |
| Appraisal & Valuation | Your home’s value is appraised by a VA-approved professional based on the finished value (after construction). The VA issues a Notice of Value (NOV). | There is no cost to apply. |
| Loan Underwriting | The lender reviews all documents (COE, contract, plans, title, borrower financials) and issues the final loan commitment. | Locking-in the construction loan permanent terms (rate, term, payment) prior to construction start. |
| Closing | The borrower executes a single set of closing documentation for both the construction and permanent loans. The VA funding fee is charged at closing. | Originating the loan and ensuring construction draws are disbursed from escrow. |
Phase 3: Construction and Permanent Loan Terms
Following closing, the home is built, and the loan automatically converts from a construction loan to a permanent mortgage.
| Step | Description | Security America Mortgage Focus |
| Loan Draws | Loan proceeds are disbursed to the builder in scheduled draws as construction advances (e.g., foundation, roof on), paid through an escrow account. | Accessing and monitoring the builder’s progress at each point of completion before any funds are released. |
| Construction Period Payments | The borrower is not required to make principal & in many cases interest payments on the construction loan during this time period (though they may choose to). | Managing the escrow and draw process to facilitate timely withdrawals and allocations. |
| Final Completion & Conversion | Once construction is complete, a final inspection confirms all work complies with VA standards and the approved plans. There is no second closing. | Ensuring a smooth transition to the permanent mortgage terms without modification to the final loan amount based on the Loan-to-Value (LTV). |
The Advantages of Security America Mortgage Program:
- One-Time Close: Pay once– saving you money and the headaches of a second closing.
- Rate Lock: The long-term rate is locked in at the initial closing, so you’ll know what your permanent payment will be.
- Rate Change Option: Security America Mortgage can offer a velocity change rate if market conditions improve during the construction period, potentially allowing you to secure a lower interest rate without refinancing (this is subject to current lending guidelines).
Why Veterans Like This Program
- Streamlining: One loan, one closing, one transaction.
- VA Benefit Eligible: Access to Veteran-friendly terms and cost savings associated with the VA benefit.
- Predictability: The final price tag is established upfront with a pre-approved builder and a fixed-price contract (subject to builder contract terms).
- Personalized Service: As a Veteran, you receive custom underwriting and dedicated service from an experienced lender like Security America Mortgage.
Next Steps
If you’re a Veteran that wants to build the house of your dreams:
- Contact Security America Mortgage to verify you qualify and select a builder.
- Choose a VA-Approved Builder and finalize your Plans, Budget, & Contract.
- Submit your COE, plans, and builder for approval as required by lender.
- Close once, and proceed with construction knowing the permanent financing is ready.
Ready to take the next step?
Call 1855GoVANow and their team can introduce you to a trusted loan officer at Security America Mortgage who specializes in VA One-Time Close Construction Loans.
Let’s build your home and secure your future.
