The VA One-Time Close Construction Loan
Build Your Home, Your Way
Use your VA benefit to build the home you actually want. The VA One-Time Close finances your land and construction in one loan with one closing — $0 down with full entitlement, no PMI, your rate locked before construction begins, and in most cases no mortgage payments until your home is complete.
VA OTC available in these states: CA, CO, FL, GA, IA, ID, KS, OK, PA, SC, TX & VA
A Note from Alicia
Alicia MedfordOwner/Broker & VA Construction Loan Specialist · NMLS #2460866
Step One
Start in the Right Order
The biggest mistake I see is starting with the land. Before you do anything else, follow this order:
Get Pre-Approved First
Know your budget before anything else. A pre-approval shows exactly what you're verified to borrow, so every conversation after this is based on real numbers.
Builder Second
Talk to a builder before you shop for land or plans.
Plans Third
Know what you want to build and what it will cost.
Land Last
Unless you can buy it outright or secure it in your name with a land loan, hold off.
How It Works
How the VA One-Time Close Works
One loan. One closing. Land and construction financed together before the first shovel hits the dirt.
Rate Locked Early
Your interest rate is locked before construction begins.
Qualify Once
You're approved upfront, not twice.
Appraisal Upfront
The future value of your finished home is set before you build.
No Second Loan
No refinance or second closing after construction.
Your VA Benefit
What Your VA Benefit Brings to the Table
$0 Down Payment
Eligible Veterans with full entitlement can build with $0 down when the Total Acquisition Cost (TAC) is supported by the appraisal and VA guidelines. In most cases, no land equity is required. Closing costs still apply.
No Mortgage Insurance
The VA guarantee replaces PMI, eliminating a significant monthly cost that other loan types require.
Long-Term Rate Advantage
The construction rate runs higher than a standard VA rate while your home is being built. Once construction is complete, you may be eligible for a rate modification (market-dependent, not guaranteed).
No Payments While You Build
In most cases, construction interest is covered by an interest reserve financed into the loan, so you typically won't make mortgage payments until your home is complete.
What's Included
What the Loan Can Cover
The VA doesn't lend money — it guarantees a portion of the loan so approved private lenders can offer these terms. As a wholesale broker, Merit Mortgage Group works with VA-approved lenders to find the right fit for your build.
- Land
- Turnkey Home Construction
- Builder contingency (5%) — any unused portion is applied to your principal balance once construction is complete
- Construction Interest Rate Reserves
- Construction Draw Fees
- Title Date Down
- Builder Credit Toward Closing Costs (if applicable)
Know Before You Build
The Program Rules
Because the VA OTC finances raw land and an unbuilt home at 100%, it's one of the riskiest loans on the market — which is why the rules are strict. Knowing them now saves time later.
No Self-Contracting
You can't act as your own builder. A licensed contractor must manage the build.
Turnkey Builder Required
Your builder delivers the finished home, start to finish.
Lender-Vetted Builder
The VA no longer approves builders. Your builder must be accepted by the lender's risk management team, have completed 10 homes in the last 3 years, and have an acceptable D&B score or soft credit pull score.
New Construction Only
A single-family home built on undeveloped land — stick-built, barndominium, modular, and manufactured homes are all eligible. It can't be used to renovate or rehabilitate an existing home.
11-Month Build Window
Construction must be completed within 11 months — the VA wants these loans back for insuring within 12 months of closing.
Primary Residence Only
The home must be your primary residence.
Not Building Stick-Built?
Modular & Manufactured Homes
Modular and manufactured homes are allowed under the VA One-Time Close.
Flexible Draw Schedule
The draw schedule can be adjusted to meet your builder's specifications, with lender approval.
Same Program, Same Process
Everything else works the same: one loan, one closing, builder acceptance, the 11-month build window, and the primary residence requirement.
Know the Numbers
The Real Cost of Building
This is where most people's plans change — and that's okay.
We rarely see projects under $400,000, and most land above $750,000. Plenty of Veterans I talk with decide an existing home makes more sense once they see the numbers — and our VA purchase rates are very competitive if that's your path.
Explore VA Purchase LoansFit Check
Is This Loan Right for You?
You're Ready If You:
- Already own land or have a plan to secure it
- Have spoken with a builder
- Understand realistic construction costs in your area
- Are ready to move forward with a project
You're Not Ready Yet If You:
- Haven't talked to a builder
- Don't know local construction costs
- Are hoping the lender will tell you what to build
- Are looking at land with no plan to secure it
- Have a budget well below current building costs
Step by Step
Your Roadmap
Plan & Qualify
Get Pre-Approved
Complete our online application. We review credit, income, assets, VA eligibility, and work history. You'll receive a Total Acquisition Cost (TAC) breakdown, estimated loan terms, and estimated closing costs, then we'll schedule a consultation to talk through your budget and plans. Closing costs are provided separately in your Loan Fees Worksheet.
Talk to a Builder
With your verified budget in hand, get your price per square foot, total construction cost, site work costs, and an honest read on whether the project is feasible.
Approve & Close
Builder Acceptance
Your builder must be accepted by the lender's risk management team and provides: contractor license, driver's license, proof of insurance, a completed builder questionnaire, client references, and a history of at least 10 completed homes in the past three years. All builders must have an acceptable Dun & Bradstreet (D&B) score or an acceptable soft credit pull score. Once accepted, you and your builder finalize the construction contract.
Plans, Budget & Appraisal
Final blueprints (all elevations, foundation, floor, and wall section plans), construction contract, detailed budget, VA Form 26-1852 (Description of Materials), and a survey or plot map. The appraiser determines the future value of the finished home.
Underwriting & Project Review
Mortgage underwriting reviews credit, income, assets, and homeowners, title, and builder's risk insurance. The project review covers the builder, contract, plans, budget, appraisal, and land contract if applicable.
Closing
You'll receive a welcome packet, a draw schedule, and construction instructions. Your builder typically receives the first draw about one week after funding. The first draw is 10% of the build cost.
Build & Move In
Construction
Your builder is paid in draws. Before each draw, a third-party inspector verifies and photographs completed work. Funds are released for completed work only; a percentage of materials may be paid in advance, but directly to the supplier.
After Construction
Once your home is complete, your loan may qualify for a post-construction rate modification depending on market conditions, which can lower your rate and payment.
Questions?
Frequently Asked Questions
What is a VA One-Time Close (OTC) Construction Loan?
A VA One-Time Close Construction Loan combines the construction loan and permanent mortgage into one single closing. Veterans close once, avoid re-qualifying after construction, and automatically transition into the permanent VA loan once the home is complete.
Is there really $0 down on a VA construction loan?
Yes. Eligible Veterans with full entitlement can build with $0 down, provided the Total Acquisition Cost (TAC) is supported by the appraisal and VA guidelines. In most cases, no land equity or cash down payment is required. (Closing costs are required.)
Do I have to make payments while the home is being built?
Typically, no monthly mortgage payments are required during construction. Interest is covered through an interest reserve, which is built into the construction budget and financed into the loan.
Why is the construction interest rate higher than a normal VA loan?
Construction rates are temporarily higher because the lender is funding a project with completion risk. Once construction is complete, borrowers are eligible for a rate modification, which has historically resulted in a lower permanent rate (market-dependent and not guaranteed).
Can I refinance after the home is built?
Yes. After construction is complete and the loan is modified, Veterans may later be eligible for a VA IRRRL refinance after meeting seasoning requirements (typically 210 days and 6 payments). This allows further rate reduction if market conditions improve.
Why does my builder need to be accepted?
VA construction loans require builders to be reviewed and accepted by risk management. This protects the Veteran and the lender by confirming the builder is licensed, insured, financially stable, and capable of completing the project.
What is a construction draw, and why is the first draw scrutinized?
Construction funds are released in draws as work is completed. The first draw requires clear budget allocation to confirm funds are being used for approved line items. This helps keep the project on budget and prevents delays later. The first draw is 10% of the build cost.
Why is a progress budget required?
The progress budget allows the lender and its draw management team to track construction costs against completed work. If draw requests exceed budgeted amounts, delays can occur. A realistic budget upfront keeps construction moving smoothly.
What happens if the appraisal comes in low?
If the appraisal is short, the VA requires the Tidewater process to be initiated. This allows additional comparable sales to be submitted before the value is finalized. If needed, a Reconsideration of Value (ROV) can be requested using stronger data and documented errors.
What makes VA construction loans different from other construction loans?
- $0 down
- Land and construction in ONE loan
- No payments during construction (in most cases)
- VA-backed protections for Veterans
- Primary residence only
They are more complex upfront, but significantly more favorable long-term for eligible Veterans.
Client Reviews
What Our Construction Clients Say
"Alicia and Merit Mortgage were awesome to work with to fund our home build with a VA one time close construction loan. They were honest, timely, and always motivated to keep things moving towards closing. Highly recommended for VA OTC product!"
"They assisted us with a one-time close construction loan for our new home and were fantastic to work with... highly knowledgeable about the construction lending process. They handled our timeline and constraints with ease. If you're building a home, this is the team you want in your corner!"
"This was my first time purchasing land and doing a VA construction to permanent loan to build our house. There were several lenders/brokers that just made the process sound so difficult and challenging but Alicia was quite the opposite."
"Alicia and the Merit Mortgage team did a fantastic job in guiding us through the process and securing our loan for new home construction. Very professional, Very helpful, Highly recommend."
Let's Talk About Your Build
Whether you're just starting to explore or already have land and a builder lined up, the first step is the same: get pre-approved so you know exactly what you're verified to borrow.
Already working with a builder? I'm happy to talk with them directly and walk them through the process.
Alicia Medford · Owner/Broker, Merit Mortgage Group · NMLS #2460866
VA Construction Loan Disclosures: Merit Mortgage Group LLC (NMLS #2460866) is a mortgage broker, not a lender, and is not affiliated with or endorsed by the U.S. Department of Veterans Affairs or any government agency. VA loans are made by private, VA-approved lenders; all credit decisions, rates, terms, and fees are set by the lender. Eligibility requires a valid Certificate of Eligibility; $0 down applies to borrowers with full entitlement, closing costs apply, and a VA funding fee may apply unless exempt. Construction cost ranges are estimates only. Post-construction rate modifications depend on market conditions and are not guaranteed. This is not a commitment to lend or extend credit. View all disclaimers · NMLS Consumer Access
Merit Mortgage Group, LLC
1 Prestwick
Williamsburg, VA 23188
Phone: (757) 755-0206
Company NMLS #2460866
www.nmlsconsumeraccess.org
Licensed in
CA, CO, FL, GA, IA, ID, KS, OK, PA, SC, TX and VA
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