home under construction

A Guide To VA Construction Loans

Jamie Johnson4-minute read

August 30, 2021


If you’re a service member or veteran who’s looking to build your own home, you might want to apply for a VA construction loan. Unlike VA loans, not all lenders offer these types of loans, and there is quite a bit of paperwork involved.

Keep reading to learn more about how to qualify for a VA construction loan. It’s important to note that Rocket Mortgage® does not offer funding to build the house but can help you with a VA loan once the house is complete.

What Is A VA Construction Loan?

You’re probably familiar with VA loans, where you receive a lump sum payment to buy an existing home. But what if you’re a current service member or a veteran looking to build your own home?

If so, then you may be a good candidate for a VA construction loan. VA construction loans are short-term loans that will help you cover the costs of constructing a special home. And instead of receiving one upfront payment, VA construction loans only pay for the portion of your home that’s completed.There are quite a few advantages to applying for a VA construction loan. For one thing, there are no down payment requirements. And if you choose not to make a down payment, you won’t be required to take out private mortgage insurance (PMI).

Plus, many homeowners who take out VA construction loans are exempt from paying the VA funding fee.

Who Qualifies For A VA Construction Loan?

If you’re interested in taking out a VA construction loan, there are specific requirements you have to meet. And the process is much more time-consuming than simply applying for a VA loan.

Just like with a VA loan, you’ll need to prove that you’re an eligible service member or veteran. But you’ll also need to meet the following requirements:


  • You must find a licensed, insured builder

  • You and the builder must submit a complete set of plans when applying for the loan

  • You may need to submit additional documentation about the materials you plan to use

  • The home must be appraised

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How Do VA New Construction Loans Work?

The VA construction loan process is complicated because few lenders offer this kind of loan. But it’s not impossible – here’s the step-by-step process you’ll take to apply for a VA construction loan.

1. Get A Certificate Of Eligibility (COE)

VA loans and VA construction loans are only available to active duty service members or veterans. And to prove that you meet these conditions, you’ll need to provide a COE.

Your COE proves that you meet the requirements to apply for your VA construction loan. You’re eligible for a COE if you’ve served at least 90 days of active service or completed 6 years of honorable service.

2. Get Preapproved For A Loan

Next, you need to get preapproved for the loan. You can do that through a bank or credit union. However, not all VA loan lenders provide VA construction loans, so you may have to do some digging.

Preapproval is essential because it helps you get an idea of the type of house you can afford to build. It also shows your builder that you’re committed to seeing this process through. 

3. Find A VA-Registered Builder

Once you’ve been preapproved for the loan, you can start looking for a VA-registered builder. The Veterans Information Portal is an excellent resource for you to use.

Any builder you use must be VA registered to get approved for a VA construction loan. And they’ll have to submit their plans for the home and the materials they plan to use ahead of time.

4. Get The Property Appraised

The next step is to hire a VA home appraiser to evaluate the proposed plans. It’s a good idea to choose an appraiser who is familiar with VA construction loan guidelines.

5. Close On The VA Construction Loan

Once your initial plans have been approved, it’s time to close on the VA construction loan. The entire process could take 45 – 60 days to complete.

Unlike a typical mortgage, you won’t receive the funds immediately upon closing. Instead, the funds will be dispersed depending on the timeline of your project. The remainder is deposited into an escrow account to be withdrawn on an as-needed basis.

6. Pass VA Inspection

Once the home is built, you’ll need to complete an official VA inspection. Once this is done, your project is considered complete, and the loan becomes a permanent VA loan.

Things To Consider About VA Construction Loans

The idea of building your own home is exciting, but qualifying for a VA construction loan is not easy. The loan process takes 45 – 60 days to complete, and you have to close on the loan before construction can begin.

And owner/builders are not allowed. Instead, all builders must be licensed, insured and approved by the VA. And the builder is responsible for the construction closing costs, though these costs can be wrapped into the buyer/builder agreement.

FAQ: VA Construction Loans

Let’s look at a few additional questions you may have about VA construction loans.

What Kind Of House Can I Build With A VA Construction Loan?

Every lender has specific requirements for the types of homes built with a VA construction loan. For example, mobile homes or manufactured housing are unlikely to be approved.

How Are Interest Rates Set With VA Construction Loans?

The Department of Veteran Affairs doesn’t set or regulate interest rates on VA homes. Instead, the interest rates depend primarily on the borrower’s credit score and lending history.

When Do Mortgage Payments Begin With A VA Construction Mortgage?

VA mortgage payments begin once the home construction is completed, and the loan must be repaid within the remaining term. You’ll need to discuss the repayment terms directly with your lender.

The Bottom Line

There are plenty of loans available when it comes to home building. But VA construction loans make it possible for active service members or veterans to build their own home. There are many advantages to taking out this type of loan, but the approval process is not easy.

You should gather your paperwork and make sure you meet the requirements before beginning this process. If you’re interested in a VA loan after your construction is complete, you can check out our guide to VA loans and the current VA rates before applying.

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Jamie Johnson

Jamie Johnson is a Kansas City-based freelance writer who writes about a variety of personal finance topics, including loans, building credit, and paying down debt. She currently writes for clients like the U.S. Chamber of Commerce, Business Insider, and Bankrate.