c. What the Builder Must Pay

On a construction/permanent home loan, the builder is responsible for

·   interest payments during the construction period, and

·   all fees normally paid by a builder who obtains an interim construction loan including, but not limited to

-   inspection fees

-   commitment fees

-   title update fees, and

-   hazard insurance during construction.

d. Interest Rate

The permanent mortgage loan interest rate is established at closing.

Lender’s may offer a “ceiling-floor” where the veteran “floats” the interest rate during construction.  The agreement must provide that at lock-in, the permanent interest rate will not exceed a specific maximum interest rate yet also permit the borrower to lock-in at a lower rate based on market fluctuations.

Note: The borrower must qualify for the mortgage at the maximum rate. 

e. What Fees the Veteran Can Pay

The veteran may not pay any fees which are the builder’s responsibility.  Fees the veteran can pay are described in section 2 of chapter 8.

f. Funding Fee and Loan Reporting

The funding fee is due and payable to VA within 15 days of loan closing; that is, it is not tied to the commencement or completion of construction.  The loan must be reported to VA within 60 days of receipt of a clear final compliance inspection report.

g. Loan Guaranty Certificate

Although the loan will normally be considered guaranteed upon closing, the LGC on a construction/permanent home loan will not be issued until a clear final compliance inspection report has been received by VA.