VA Construction Loan: What You Need to Know

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When most people think of a VA loan, they imagine using it to purchase an existing home. However, the VA loan program can also be used to finance the construction of a new home.

VA construction loans are a bit more complicated than your typical home purchase loan, so it’s important to know what to expect before you begin the process.

One of the biggest challenges with VA construction loans is finding a lender. Because these loans are not as common as traditional home purchase loans, many lenders do not offer them.

However, there are a few lenders who specialize in VA construction loans and it is possible to get financing for your new home.

Another thing to remember is that you will need to meet additional requirements when applying for a VA construction loan. Beyond the standard VA loan eligibility requirements, you will also need to submit plans and specifications for the home you intend to build.

Once your loan is approved, the lender will release funds in stages as the construction of your home progresses.

What is a VA Construction Loan?

A VA construction loan allows Veterans and military service members to borrow money to purchase land and immediately begin building a home on that land. 

Unlike a VA mortgage, which covers the cost of building or renovating a home, a VA construction loan only covers the cost of building materials, labor and other expenses related to the foundation and frame of the home.

The borrower will need to have funds set aside for the costs associated with finishing out the interior of the home. You cannot buy land only with a VA construction loan.

VA Construction Loan Requirements 

A VA construction loan requires you to complete several steps before you can close on the loan and begin building your home.

1. Confirm eligibility and entitlement

The first step to securing a VA construction loan is to obtain your Certificate of Eligibility (COE) that proves that you’ve met the minimum service requirements to be eligible for a VA loan. You can apply for your COE online through the VA eBenefits portal.

If you’re a veteran, you’ll need your DD214 discharge papers. If you’re an active-duty service member, you’ll need a statement of service signed by your personnel officer.

2. Choose a lender and get preapproved

The VA doesn’t lend money directly; instead, you’ll apply through a bank, credit union or other kind of lender that offers VA loans. Keep in mind that it can be difficult to find a lender that’ll extend a VA construction loan, even if it does provide VA purchase loans.

3. Find a VA-registered builder 

4. Property appraisal 

5. Pass inspection

Should I Get a VA Construction Loan?

In ideal situations, VA construction loans are used to build a primary residence on a few acres of land. You may also use a VA construction loan if you want to build a non-primary residence on land you already own.

However, using a VA loan to buy land only or buying land for a non-primary residence is not an option. 

The VA loan’s primary purpose is to help veterans get into primary residences more easily and with less out-of-pocket costs.

The most important thing to remember about VA loans is that you cannot simply buy land with one—the point of the VA loan is to help veterans get into primary residences more easily and with less out-of-pocket costs.

However, there are some situations where a VA construction loan is not the best option. For example, if you’re only buying land, or if you’re buying land for a non-primary residence, you won’t be able to use a VA construction loan.

This is because the point of the VA loan is to help veterans get a primary residence.

So, if you’re considering a VA construction loan, make sure that you’re actually planning to use it to finance the construction of your primary residence. Otherwise, you may want to consider another type of loan.

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