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VA Construction Loan and Division of Tenants

by Veroniqua
(Castle Rock CO USA)

Due to cost of living, property cost, and housing my husband (retired Navy), myself (retired wife) and 25 yr old son live together and have for over 5 years. Our son pays 1/3 of rent, food & any other needed expenses. Now we are looking at the future and finding that home ownership is not going to get any easier. At the tender age of 55 yrs we are buying our first home...or trying to.

According to Zillow.com:
"The median home value in Colorado is $348,400. Colorado home values have gone up 7.8% over the past year and Zillow predicts they will rise 3.3% within the next year. The median list price per square foot in Colorado is $224. The median price of homes currently listed in Colorado is $406,900 while the median price of homes that sold is $347,000. The median rent price in Colorado is $1,800."
https://www.zillow.com/co/home-values/

We are looking at purchasing a parcel of land from one party, and a modular home to place on a foundation on this parcel from a builder. The time from land purchase to move in would be approx 6 months therefore the questions begin.

This is our breakdown in simplified numbers.
$100K LAND
$150K MODULAR HOME
$100K LAND PREP, SHIPPING & SET UP
TOTAL COST $350K

1) Would the VA benefit consider this to be a single loan?

My son was a dependent however after retirement has aged out at 25 yrs old. He lives with us, and will be a tenant in common residing in the new home. We depend on his income to meet expenses & after this purchase will require it to make up the additional cost over what we pay for rent. He must be on the loan & get qualified. I even asked if we could make him as a dependent & claim his money as additional income and of course the answer was no. I can't seem to get a straight answer from anyone at this point.

2) I am extremely confused over the division of benefits, where VA stops and his own qualification begins. If it was just my husband & I we would get 100% benefit; in this type of case does the VA look at 1/3 division. Do we get to "keep" the entire VA Benefit of 250K w/0% down and then any amount over would be what he would be qualifying & paying(example 20% down of 100K).

Thank you so very much for any information, in plain English please, or references you can direct me to.

Veroniqua

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VA Construction Loan and Division of Tenants answer
by: Jeffrey

Hello Veroniqua,

Thank you for your very detailed question. It certainly caused me to do research beyond what I would normally do. So please forgive the delayed response.

VA does guarantee construction loans. However, the builder, the lender, and all the borrowers have to meet certain qualifications. It may not be an easy task, because the lender will require the builder to be a VA certified contractor. That may be the most difficult part since you are talking about a modular home being placed on a vacant lot. This may be a good reason why you're not getting any straight answers.

Normally, new construction homes under their program would be a stick built home and not a modular home.

Furthermore, your son as a third borrower on a VA loan, would reduce your VA eligibility certificate according to my research.

This is a very complicated transaction and requires a lot of homework on your part. I'm not sure this transaction is possible. Here's a link that may help you:

Visit VA.GOV

I hope this helps, if you do work out this transaction, please come back and give a comment on this for the benefit of other VA website visitors.

Kind Regards,
Jeff

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