What the VA OTC program actually is

VA OTC pairs a VA-guaranteed construction loan with the VA permanent mortgage inside a single closing. The construction phase funds the build in draws, just like any other OTC. When the certificate of occupancy is issued, the loan modifies into a standard VA permanent mortgage — the same VA program that millions of veterans have used for purchase loans.

The entire loan is guaranteed by the Department of Veterans Affairs. That guaranty is what removes the down payment requirement.

Who qualifies

• Active-duty service members meeting the minimum continuous-service threshold.
• Veterans with a qualifying discharge.
• Reservists and National Guard members meeting specific service thresholds.
• Surviving spouses of service members who died in the line of duty or from a service-connected condition.

Your lender (us) pulls your Certificate of Eligibility from VA directly. You don't need to find it or request it yourself — we handle the COE request as part of the loan application.

Zero down, explained

Most VA borrowers pay nothing at closing toward a down payment. That is because the VA guaranty replaces the equity cushion that a conventional lender would require. Practically, this means: if you have the land (or you are buying it inside the OTC), your monthly budget for the build doesn't include a large cash injection at the front end. You are funding permits, the builder contract, and the first draw — but the equity in your loan structure comes from the VA guaranty, not from your bank account.

The one exception is the VA funding fee, a one-time fee paid at closing (or financed into the loan). It is a percentage of the loan and varies based on whether this is your first VA loan, your prior VA loan history, and whether you qualify for a funding fee exemption (most service-connected disabled veterans are exempt).

Understanding your entitlement

Your VA entitlement is your share of the VA guaranty. There are two layers:

• Basic entitlement. The foundational amount every qualified veteran receives.
• Bonus (tier 2) entitlement. An additional guaranty that kicks in for higher loan amounts and is what lets veterans build larger custom homes.

If you have used a VA loan before and the prior loan is still outstanding (or was foreclosed), your remaining entitlement is reduced by the portion already in use. Most veterans who have paid off a prior VA loan have their full entitlement restored — but it doesn't happen automatically. We run the entitlement restoration as part of your application.

Your Certificate of Eligibility

The COE is the document that tells us you qualify, how much entitlement you have, and whether you are funding-fee exempt. To pull your COE, we usually just need:

• Full name and Social Security number.
• Service dates (for active duty or recently separated, a current statement of service; for veterans, the DD-214).
• If applicable, documentation of a service-connected disability rating.

Pull is usually same-day through the VA portal. If there is a hiccup — a service gap, a discharge characterization issue, an out-of-date record — we walk you through the correction process. Don't let that scare you off; most hiccups resolve within a week.

Approved builders for VA OTC

VA construction loans carry one additional builder requirement beyond standard OTC: the builder must be registered with the VA (have a VA Builder ID). Registration is straightforward — we walk your builder through it if they don't already have one. The packet is simpler than most lenders let on. Your builder doesn't need prior VA project experience. They need to be a competent, licensed, insured general contractor.

What the program will not cover

A few property types are ineligible on VA OTC:

• Accessory dwelling units as the primary financed structure.
• Cooperative ownership (co-ops).
• Attached condo construction as a standalone new-build unit — VA has specific requirements here that rarely align with OTC.

Single-family detached, modular, and qualifying manufactured homes on permanent foundations all do qualify. Barndominiums and non-traditional structures can qualify if they appraise as single-family residential and meet VA's minimum property requirements.

Colorado-specific notes

Jon Howard is licensed in Colorado. Fort Carson, Peterson Space Force Base, the Air Force Academy, Buckley Space Force Base, and the state's large veteran population make Colorado one of the densest VA OTC markets in the country. Specific zones where we see heavy VA OTC activity:

• El Paso County — Fountain, Security-Widefield, Falcon, Monument.
• Adams County — Watkins, Bennett, and the Buckley SFB commute zone.
• Douglas County — Castle Rock and Parker exurban.
• Larimer and Weld — acreage custom builds.

If you are stationed on active duty and planning to build either near base or at your next duty station target, we can underwrite the file so the timing lines up with your PCS.

A typical VA OTC timeline

1. Week one. Scenario call, COE pull, initial doc collection.
2. Weeks two to three. Builder registration (if needed), plans review.
3. Weeks three to five. VA appraisal ordered and delivered (VA appraisals run a defined schedule — no expediting).
4. Weeks five to seven. Underwriting, conditions, title, VA file upload.
5. Weeks seven to ten. Clear to close, closing disclosure, close + record.

First draw funds the next business day after recording. Eleven-month construction window begins.

The three things veterans most often get wrong

• Assuming entitlement is used up from a prior loan. If the prior loan is paid off, you can almost always restore full entitlement. Ask.
• Signing a builder contract before confirming the builder will register with VA. Bring the builder to your scenario call. If there is a gap, we want to address it before contracts are signed.
• Underbudgeting the funding fee. If you are not exempt, it is a real number. Our scenario pricing shows it explicitly so there are no surprises.

Why first-time veteran builders choose OTC

Most veteran buyers have only ever used a VA loan for a purchase. When they hear "construction loan," the first reaction is usually "that's going to be complicated — I probably need a different lender for this." The opposite is true. VA OTC is in many ways simpler than a VA purchase on a resale property, because the appraisal is based on plans and comps, there is no seller-negotiation cycle, and the whole transaction is one closing.

Compliance note

Jon Howard is licensed in Colorado. VA OTC loans are underwritten to VA guidelines; borrower qualification is subject to VA eligibility, COE availability, and current program parameters. Call for current rates, funding fee schedules, and program availability.

Next step

If you are VA-eligible and planning a 2026 build, start with a scenario call. Bring your DD-214 (or current statement of service), a general sense of the lot or target area, and a builder name if you have one. We'll pull your COE, run your entitlement, and tell you exactly what zero-down-to-home looks like for your specific file.

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