Start Your VA OTC Construction Loan Application
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Most veterans who want to build in Texas believe they need two separate loans — one for construction and one to convert to a permanent mortgage. That means two applications, two closings, two sets of closing costs, and two chances for the interest rate to move against you.
A VA One-Time Close Construction Loan combines construction and permanent financing in one closing. Conversion to permanent financing requires completed construction, required inspections, final documentation and the final draw. Your loan officer will explain your rate-lock and payment terms; receiving the keys or a certificate of occupancy alone does not trigger conversion.
This page covers exactly how the VA OTC works in Texas, what it takes to qualify, and what building with this loan actually looks like from pre-approval to move-in. If you are ready to run your numbers, the BAH Calculator can help you explore your military housing allowance. A loan officer must review your land, construction budget and financial details to estimate financing.
Already own land in Texas or planning to buy soon?
For a project review, have your Texas county, property address or parcel number, acreage, land-loan balance, builder, available plans, estimated budget and target start date ready. If you are still shopping for land, request a financing review before committing to a parcel or builder contract. Confirm access, zoning, utilities and any well or septic requirements with the appropriate local professionals. Program-specific acreage and property requirements need lender review.
Request a review of your land and build plans.
Loan-limit sources: VA entitlement and loan limits and FHFA 2026 conforming limits.
What Is the VA One-Time Close Construction Loan?
Most veterans who want to build believe they need two separate loans. The VA OTC eliminates that entirely. One application, one closing, one rate.
The VA One-Time Close Construction Loan — also called the VA OTC, VA Single Close, or VA Construction-to-Permanent Loan — combines three things into a single transaction: land purchase (or land equity if you already own the lot), construction financing with a draw schedule paid directly to your builder, and a permanent VA mortgage after construction is complete and all lender completion requirements are met.
Before the OTC program, veterans had to obtain a conventional construction loan, then refinance into a VA loan after completion. That meant qualifying twice, paying closing costs twice, and absorbing rate risk during the entire build period.
With the VA OTC, you close once. Your rate is locked on day one. Your BAH qualifies you the same way it does on a standard VA purchase. And you keep every VA loan advantage — no private mortgage insurance, no down payment, and competitive long-term rates.
Builder ID Requirement Rescinded
Effective March 31, 2025, the VA no longer issues or requires VA Builder IDs under Circular 26-25-01. Lenders now qualify builders directly. Your builder must be licensed and insured in Texas and meet lender construction standards. We work with vetted builders across every Texas region.
🏗️ Land Purchase or Equity
Buy land as part of the closing or apply existing land equity. Either way it rolls into a single loan. No separate land financing needed.
🔨 Construction Phase
Funds draw directly to your builder as work progresses. You make no mortgage payments during the build period of up to 11 months. Interest during construction is included in the construction budget.
🏠 Permanent 30-Year Mortgage
After the certificate of occupancy, required inspections, final documentation and final draw are completed, the lender processes conversion to the permanent mortgage under your loan terms. A certificate of occupancy alone does not trigger conversion.
📌 Rate Locked From Day One
Your rate is locked at initial closing — not after construction finishes. You are protected from market rate increases during the entire build period.
How the VA One-Time Close Works in Texas
From pre-approval to keys in hand — here is the complete process so you know exactly what to expect at every stage.
Pre-Approval and Builder Qualification
Your lender verifies income including BAH at the grossed-up rate, pulls credit, confirms VA entitlement, and issues a pre-approval letter. This is also when your lender qualifies your builder — confirming licensing, insurance, and lender construction standards. No VA Builder ID required since March 31, 2025.
Builder Contract and Draw Schedule
You and your builder sign a construction contract with a fixed price, draw schedule, and completion timeline. Your lender reviews the contract and requires a contingency reserve of 5% of the construction cost, built into the loan to cover unexpected costs.
VA As-Built Appraisal
A VA-approved appraiser reviews your plans and establishes the expected completed value of the home — called an as-built appraisal. Your loan is based on the lower of the total project cost or the appraised as-built value.
Underwriting and Clear to Close
Full underwriting reviews your income, credit, builder contract, appraisal, and VA entitlement. Your BAH gross-up, land equity, and funding fee exemption (if applicable) are all confirmed at this stage. According to Jason Noble, application to closing averages about 120 days, with roughly 30 days devoted to financing. Land, plans, builder selection and contract negotiations account for much of the remaining time; timing varies by project.
Single Closing — Rate Locked
Land and construction financing close in one transaction. Your interest rate is locked. If you are buying land as part of the deal, it transfers at this closing. Your builder begins drawing funds immediately. No mortgage payments are due while your home is being built.
Construction Phase and Draw Inspections
Your builder requests draws from the lender as each phase of construction is completed. Each draw is inspected before release. No mortgage payments are due while your home is being built. Maximum construction period: 11 months; actual time depends on home size, builder, and local permitting.
Completion Requirements and Permanent Financing
A certificate of occupancy is one completion requirement. The lender must also receive required inspections, final documentation and the final draw before processing conversion under your loan terms. Ask your loan officer to explain your rate-lock terms and when permanent mortgage payments begin.
Total timeline:Security America Mortgage allows a maximum construction period of 11 months. Additional time may be needed for pre-approval, builder selection, contract preparation, and closing before construction begins. Veterans who already own suitable land and have finalized construction plans and an approved builder may complete the pre-construction stages more quickly..
VA One-Time Close vs. Traditional Two-Close Construction
Veterans comparing construction loan options deserve a straight comparison — not marketing language. Here it is.
One closing — land, construction, and permanent mortgage in a single transaction
Closing costs paid once only
Interest rate locked at initial closing — protected for the entire build period
Qualify once — no second underwrite at completion
$0 down with full VA entitlement
VA funding fee applies once
No private mortgage insurance ever
BAH grossed up 25% for qualification
Two separate closings required — construction loan and permanent mortgage
Closing costs paid twice — once at each closing
Rate not locked until after construction — full market exposure during build
Must qualify again at permanent loan closing
Down payment often required for construction phase
VA funding fee may apply again at permanent closing
PMI may apply on construction loan phase
BAH gross-up may not be recognized by conventional lenders
VA OTC Eligibility Requirements
VA construction loan eligibility mirrors standard VA loan eligibility with a few additional requirements specific to construction financing.
Military Service
You must have sufficient VA entitlement from qualifying military service. Active duty, veterans, National Guard, and Reserve members all qualify under standard VA service requirements.
Credit and Income
Credit: 640+ is our typical qualifying benchmark for VA One-Time Close construction loans; 620 is the minimum, and we submit files from 620–639 for individual review. See credit score details → Income includes base pay, BAH (grossed up 25%), BAS, disability pay, and other verified sources.
Builder Requirements
Your builder must be licensed and insured in Texas and meet lender construction standards. No VA Builder ID required since March 31, 2025 (VA Circular 26-25-01).
Property Requirements
The completed home must meet VA Minimum Property Requirements. The land must have utility access and a viable road. Rural, acreage, and rural-residential lots are all eligible. Must be your primary residence.
What Credit Score Do You Need for a VA One-Time Close Construction Loan?
For Security America Mortgage’s current VA One-Time Close construction loan program, a 640 or higher credit score is the typical qualifying benchmark.
The minimum credit score is 620. Most approvals are 640+, and we submit files from 620–639 for individual review.
A lower credit score does not automatically mean a veteran is ineligible for VA home loan benefits. VA eligibility and lender-specific construction loan underwriting standards are different. Every application is evaluated based on the complete financial picture and applicable program requirements.
Texas Construction Costs by Region
Published estimates vary by location, design, finish level, and builder scope. These figures are for early planning only, not builder quotes. Land, site work, utilities, permits, and other costs may be separate. Ask builders for written, itemized estimates before comparing prices.
Illustrative Example: 2,000 sqft Home in San Antonio
This is an example using assumed project costs, not a quote for a typical VA OTC project. The funding-fee estimate assumes first use of the VA benefit, less than 5% down, and no fee exemption. Confirm project costs with a builder and the borrower's fee assumptions with the lender.
VA Funding Fee for Construction Loans
Most borrowers pay a one-time VA funding fee on a VA-backed purchase or construction loan. You can pay it at closing or finance it into the loan. VA-backed loans do not require monthly mortgage insurance.
| Down Payment | First Use | After First Use |
|---|---|---|
| Less than 5% | 2.15% | 3.3% |
| 5% or more, but less than 10% | 1.5% | 1.5% |
| 10% or more | 1.25% | 1.25% |
Example on a $400,000 loan amount: with less than 5% down, the fee is $8,600 for first use or $13,200 after first use. With 5% down, it is $6,000; with 10% down, it is $5,000. Your fee depends on the loan amount, down payment, prior VA loan use, and exemption status.
Some borrowers are exempt from the funding fee. This can include eligible borrowers receiving VA disability compensation, certain surviving spouses receiving DIC, and qualifying active-duty service members with a Purple Heart. Other qualifying situations may apply. Check the VA's exemption requirements and confirm your status with your lender.
if exempt
Texas VA Construction Loans: Questions Texas Veterans Ask Us
Answers from Jason Noble, COO and VA Loan Specialist, Security America Mortgage, NMLS #352672, who helps Texas veterans finance new construction.
How long does it take to build a home in Texas with a VA construction loan?
We do not set the build schedule; once the loan closes, the builder and homeowner work together to build the home. On average, we see single-family stick-built homes take about 8 to 11 months. The delays I see most are lack of preparation for permitting, changes to the plans or the build, and builders who struggle with scheduling, leaving long stretches when no work is done.
Jason Noble, NMLS #352672Can a Texas veteran pick their own builder, or build the home themselves?
The VA does not allow veterans to act as their own builder. A veteran can, however, shop for and find their own builder and bring that builder to us.
Jason Noble, NMLS #352672What should I ask a Texas builder before I sign a contract?
Ask simple questions such as "How long have you been building homes under your current company?" and "Do you have a business credit score?" Also ask whether the builder has any legal or financial issues. A builder with limited experience can be challenging, though not impossible, and bad business credit can be difficult to overcome. Builders who run a good business have no issue sharing that information; when a builder pushes back on basic business questions, that can be a red flag.
Jason Noble, NMLS #352672I own land in Texas free and clear. How does that help my VA construction loan?
Land that is free and clear gives you more flexibility with your loan. Assuming the land has value, the appraisal includes an opinion of site value, which should mean more equity and more appraised value. The more appraised value you have, the more flexibility you have with financing; you may be able to finance your closing costs, interest payments and contingency reserve.
Jason Noble, NMLS #352672I still have a loan on my Texas lot. What happens to it?
An existing land loan must be paid off with the VA construction loan. It is paid off at closing, before building starts.
Jason Noble, NMLS #352672What is the biggest mistake Texas veterans make when they decide to build?
They rush to shop for land before knowing what they want to build or who is going to build it.
Jason Noble, NMLS #352672Is one closing really better than two for a Texas build?
One closing is safest. You close before construction starts, so you and your builder agree on a fixed price that cannot change after closing, and you do not need a second loan to refinance the construction loan. With two closings, your credit, income, employment and appraised value can all change during the build, which is real risk for you and the lender. A two-time close does let you use a cost-plus builder contract, but there is really no such thing as a VA construction loan with two closings. That setup is a temporary bank construction loan, often at a variable rate, followed by a separate VA loan once the home is built. For veterans, the VA construction loan is the one-time close.
Jason Noble, NMLS #352672Is there a minimum loan amount for a VA construction loan in Texas?
We do not have a minimum loan amount, but small loans need extra thought. Many states limit what a borrower can be charged, which makes small mortgages hard to offer within those rules. I typically advise construction loans of $200,000 or more, though that is not a hard rule; it depends on the property and its location. Permitting and site development costs can also make a small loan cost-prohibitive.
Jason Noble, NMLS #352672I have a VA disability rating. Does that help me qualify?
Because VA disability income is tax-free, we are allowed to gross up disability income for qualifying purposes, in addition to the funding fee exemption.
Jason Noble, NMLS #352672Why are credit requirements tougher to build a home with a VA loan than to buy one?
When a veteran buys an existing home, the house is already there. The lender can see it, appraise it and insure it on day one. With a construction loan, the loan closes before the house exists. The appraisal is based on plans, and the lender is depending on the builder to finish on time and on budget. The lender's risk lasts through the whole build, often 6 to 11 months, instead of ending at closing. On top of that, most VA construction loans are 100% financing, so there's no down payment cushion if something goes wrong. Fewer investors buy one-time close loans, and the ones that do set higher credit minimums to offset that risk. That's why we need a 620 minimum and typically see approvals at 640+ on construction, while a strong file can be approved below that on a purchase.
Jason Noble, NMLS #352672Can I buy the land and build with one VA loan and no down payment?
We frequently close VA One-Time Close construction loans where we purchase the land with the construction loan and the veteran does not make a down payment. Most veterans prefer this approach because it helps with out-of-pocket expenses, and we have closed several of these loans this year.
Jason Noble, NMLS #352672Frequently Asked Questions
Everything Texas veterans ask before starting a VA One-Time Close Construction Loan.
Talk to Jason Noble —
VA Construction Loan Specialist
Your first call takes 10 minutes. We will verify your VA entitlement, walk through your income and BAH gross-up, and give you a real estimate before you spend a dollar on plans or land.