December 30, 2025
What Is a VA One-Time Close Construction Loan?
A VA One-Time Close (OTC) construction loan is a mortgage that finances both the construction of a home and the permanent VA loan in a single closing. Eligible veterans and active-duty service members can build a home with zero down payment, no monthly mortgage insurance, and one set of closing costs.
Can Veterans Build a Home with a VA Loan?
Yes. Veterans and active-duty military members can use a VA One-Time Close construction loan to build a new home instead of buying an existing one, as long as they meet VA eligibility and lender requirements and use a VA-approved builder.
VA One-Time Close vs FHA One-Time Close
VA One-Time Close / 0% down payment with full entitlement / No monthly mortgage insurance
No loan limits / VA funding fee may apply unless Veteran has a 10% minimum disability
FHA One-Time Close
3.5% minimum down payment / Upfront and annual mortgage insurance (MIP) / County loan limits apply and more flexible credit guidelines
For most eligible veterans, VA construction loans are more cost-effective than FHA.
Is There a Maximum Loan Limit on VA Construction Loans?
No. The Department of Veterans Affairs does not impose loan limits on VA construction loans for borrowers with full entitlement. The maximum loan amount is determined by lender approval, income, credit, and appraisal—not a VA cap. However, very few VA mortgage lenders will go greater than $1,500,000.
Do VA Construction Loans Require a Down Payment?
No down payment is required for VA One-Time Close construction loans when the borrower has full entitlement. Borrowers who choose to make a down payment—or who use land equity—may reduce the VA funding fee.
Can Land Equity Be Used for a VA Construction Loan?
Yes. If a borrower already owns the land, its equity can be credited toward the VA construction loan. Using land equity may:
Reduce or eliminate the VA funding fee / lower the loan-to-value (LTV) ratio / decrease overall out-of-pocket costs
What Is the VA Funding Fee on a Construction Loan?
The VA funding fee is a one-time charge that helps support the VA loan program. The amount depends on:
Whether it is the borrower’s first VA loan / down payment or land equity used / service status
Some veterans, including those with service-connected disabilities, may be exempt.
Who Should Consider a VA One-Time Close Construction Loan?
VA construction loans are ideal for:
Active-duty military members / Veterans / Military retirees / Service members nearing separation
Families building a long-term or retirement home. They are especially attractive for borrowers who want one closing instead of multiple loans.
Are VA Construction Loan Rates Higher?
VA construction loan rates are market-driven, not set by the VA. Rates depend on:
Interest rate environment / Construction risk pricing / Lender overlays
Rates may be slightly higher during construction but convert to a permanent VA mortgage once the home is complete.
Is an FHA One-Time Close Loan an Alternative?
Yes. The Federal Housing Administration One-Time Close loan is an option for borrowers who are not VA-eligible. FHA construction loans allow lower credit scores but require a down payment and ongoing mortgage insurance.
Bottom Line: Is a VA One-Time Close Construction Loan Worth It?
For eligible military members and veterans, a VA One-Time Close construction loan is often the most affordable way to build a home, thanks to zero down payment, no monthly mortgage insurance, and simplified financing.
Want More Information About One-Time Close Loans?
One-Time Close Loans are available for FHA, VA and USDA Mortgages. These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.
We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.
In addition, this is a partial list of the following homes/building styles that are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.
Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with a mortgage construction lender licensed in your area to contact you.
- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,500,000 and review higher loan amounts on a case by case basis. If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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