VA One-Time Close Construction Loan: A Game-Changer for Veterans Building Their Dream Home
On August 6, 2025, the VA officially launched its standardized One-Time Close (OTC) Construction Loan Program nationwide. This exciting update simplifies the process for veterans who want to build a new home by combining the land purchase, construction financing, and permanent mortgage into a single loan with one closing.
Traditionally, veterans who wanted to build had to secure a short-term construction loan first, then refinance into a permanent VA mortgage after construction was complete. That meant two separate loans, two sets of paperwork, and two closings—which could drive up costs and cause unnecessary stress.
The new VA One-Time Close loan eliminates this hassle by rolling everything into one streamlined process, making it easier and often more affordable for veterans to build their dream home.
What is a VA One-Time Close Construction Loan?
A VA One-Time Close (OTC) Construction Loan is designed to simplify the process of building a home by:
- Combining land purchase, construction financing, and permanent mortgage into one loan
- Requiring only one application and one closing
- Reducing paperwork and potentially saving thousands in closing costs compared to the traditional two-loan approach
Key Features and Benefits
✅ 100% Financing – Eligible veterans with full entitlement can finance the entire project with no down payment, unlike conventional construction loans that often require 10–20% down.
✅ No PMI – Since VA loans are backed by the Department of Veterans Affairs, you’ll avoid private mortgage insurance (PMI), saving you hundreds each month.
✅ Single Closing – Only one closing means less paperwork, fewer fees, and a faster process.
✅ Locked-in Interest Rates – Your interest rate is secured before construction begins, protecting you from potential market increases while your home is being built.
✅ No Payments During Construction (Typically) – Payments usually don’t start until the home is complete, giving you breathing room during the building phase.
✅ Streamlined Process – With a single qualification and approval, the entire process is more efficient from start to finish.
✅ Funding Fee – You still have a funding fee with the VA One Close Loan. You can visit VA.gov to learn more about the funding fee. It is also important to note that veterans with a disability rating above 10% may be exempt from the funding fee. Funding Fee
Who Qualifies for a VA One-Time Close Loan?
To be eligible, you must:
- Be an eligible veteran, active-duty service member, Reservist, National Guard member, or qualifying surviving spouse. Learn more about eligibility on VA.gov
- Possess a valid Certificate of Eligibility (COE) from the VA
- Meet lender credit requirements (typically 620+ credit score, but this may vary)
- Have stable income and meet VA residual income standards
- Plan to use the home as your primary residence
How It Works: Step by Step
- Obtain Your COE – Confirm your VA eligibility.
- Find a VA-Approved Lender – Not all lenders offer OTC loans, so find one experienced in this area.
- Get Pre-Approved – Your lender reviews your financials to determine loan eligibility and amount.
- Choose a Builder – The VA eliminated the legacy “builder ID” step making it easier for lenders to approve qualified contractors while still verifying licensing, insurance and capability. Therefore, no VA-issued builder ID is needed.
- Finalize Plans & Contract – Work with your builder to create detailed plans and a construction contract.
- Close the Loan (Once!) – Complete your single closing. Closing costs apply, but the VA funding fee can be financed.
- Begin Construction – Funds are released to the builder in stages as milestones are met.
- Convert to Permanent Mortgage – Once construction is complete and the home passes inspection, the loan automatically converts to a traditional VA mortgage.
VA One-Time Close vs. Traditional Two-Loan Approach
| Feature | VA One-Time Close Loan | Traditional Two-Loan Process |
| Number of Loans | One loan for land, construction, and permanent financing | Separate construction loan + refinance into VA mortgage |
| Closings | One closing | Two closings |
| Paperwork | Streamlined, single set of paperwork | More paperwork, more lender approvals |
| Costs | Lower closing costs, potential savings | Higher costs due to two separate loans |
| Interest Rate | Locked before construction begins | Could change before permanent mortgage starts |
| Payments During Construction | Usually no payments until completion | Payments required on construction loan |
| Financing | 100% financing with no down payment (for eligible borrowers) | Often requires 10–20% down |
Final Thoughts
The VA One-Time Close Construction Loan is a huge win for veterans and service members looking to build a custom home. By rolling everything into one loan, one approval, and one closing, it saves time, money, and stress—making the dream of building a home more achievable than ever before.
If you’re considering building your next home, this new VA program is worth exploring with a VA-approved lender and builder.
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