For many veterans and servicemembers, purchasing a newly built home using their VA home loan benefits is an ideal opportunity. The potential of being able to be the very first residents of a home with a brand new kitchen, bathrooms, bedrooms, etc. is simply exciting to think about! Hawaii VA Loans has had the privilege of successfully closing loans on new construction homes for members of our Hawaii military and veteran community. As a result of our experience, we decided that it would be beneficial to your VA home buying knowledge if we outlined a few things you should be aware of ahead of time when it comes to purchasing a newly built home.

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What does the VA consider as new construction?

The VA considers any home that has been completed within the past year and is not being sold by an owner occupant as “New Construction.”

What if the new construction is a condo, or “site condo?”

If the new construction is a condo or “site condo,” the condo will need to be approved by the VA. REMINDER: A “site condo” is a home that looks like a single family residence, but is on a lot that has been divided by CPR (Condo Property Regime). See this post for more information on site condos.  

  • To check to see if a particular condo is approved by the VA, use our condo check tool.

If the new construction home is a condo that is not approved by the VA yet, the condo will have to go through the VA condo approval process.  As long as the seller is willing, we can help with this process.  

  • The approval process will generally take about 3-6 weeks to get a new condo or “site condo” approved, and on occasion, it may take longer. Note: the condo must be approved before the appraisal can be ordered.

The “VA Builder ID” Requirement – No Exception

When a home is considered new construction, a VA builder ID and specific builder certifications and warranties are required. Many builders and developers will already have one; however, some builders that only develop homes in small bunches do not have a VA Builder ID. The ID should be obtained prior to ordering the appraisal and must be completed prior to loan closing.

To obtain a VA Builder ID, the builder will need to complete the following set of forms:

  • Builder Credit Report Requirement
  • Proof of Contractor’s License

Be sure to check if the builder has a VA Builder ID!  This is very important.  If not, one can be obtained easily from the VA, but the builder and/or developer need to ready and willing to do so.

VA Builder Certifications

The builder must certify that a number elements have been taken care of and complete the following forms to indicate that:

  • Borrower’s New Construction Not Inspected Acknowledgement
  • Builder’s Certification of Construction to CABO Standards
  • Solders and Flux Lead Certification
  • NPMA99a-Subterranean Termite Protection Builder’s Guarantee
  • NPMA99b-Subterranean Termite Service Record
  • VA Form 26-1859 – VA Builder Warranty

Key notes on obtaining the VA Builder ID & forms required for final loan approval:

It may sound like a simple task, but the forms contain a lot of legalese and other quirks. As a result, many contractors may be wary of signing such forms. On several recent transactions, we’ve run into conflicts on the seller side as to who should be considered the builder of certain “site condos.”  For large developers, this isn’t usually an issue. However, for small developers that buy smaller plots of land to build a few homes at a time, this can be a challenge.

For example, developers typically own the land and the recently built home, but hire a third party general contractor to oversee the actual construction. The developer may consider the contractor to be the builder while the contractor/builder has no equity interest in the property or transaction and may not want to sign the required forms. Are you still with us? It can get complicated! Being able to resolve these issues and establish trust between all the parties is crucial to getting the homebuyer into the home.

Our commitment to our VA clients is to pursue all avenues in order to obtain the required forms so that the VA can make final loan approval for the home buyer. Although there is often stress involved in new construction purchases, the better prepared the builder and buyer are for the steps ahead, the smoother the transaction will be!

Our team at Hawaii VA Loans is driven to simplify the VA loan homebuying process for you. If you have any more questions about this post or the VA loan process, please don’t hesitate to contact us at 808-792-4251.