Frequently Asked Questions

VA Construction Loans: Your Questions Answered

Building your dream home as a veteran has never been easier with VA construction loans. These loans offer veterans the opportunity to finance land, construction, and their future home in one seamless process. Below is a comprehensive Q&A to help you navigate the VA construction loan process.

What is a VA Construction Loan?

A VA construction loan allows eligible veterans to finance the construction of a new home, including purchasing land if needed. It’s a One-Time Close (OTC) loan, meaning it combines the construction financing and permanent mortgage into a single transaction.

What are the benefits of a VA Construction Loan?

No second closing is required; everything is done upfront.
No mortgage payments during the construction period.
The loan is locked at the start with no need for a second appraisal after construction.
Extended lock periods up to 360 days with rate float-down options.
Construction loans are serviced in-house, ensuring a smooth process.
Soft costs and interest reserves are included in the loan.
Contingency funds (minimum 2%) are built into the loan to cover unexpected expenses.

What property types are eligible?

VA construction loans can be used for:

Site-built, single-family detached homes.
Modular homes, log homes, and barndominiums.
Manufactured homes (multi-width only; single-width- requires an exception).
Homes with accessory dwelling units (ADUs) built simultaneously with the primary residence.

Ineligible properties include container homes.

How does the process work for veterans?

Qualify and Close: Veterans qualify and close the loan upfront.
Construction Begins: Building must start within 30–60 days after closing.
Finalization: Once construction is complete, the loan modifies into a permanent mortgage without requiring another appraisal.
Move-In: The veteran begins making mortgage payments once the home is completed.

Can I finance the land into the loan?

Yes, you can include the purchase of the land or pay off an existing lien as part of the construction loan. Construction must start within 60 days of closing.

What are the builder requirements?

Builders must meet the following criteria:

Submit proof of licensure (depending on state/county you are in)
Liability insurance, builder’s risk insurance
Provide a 24-month project history and evidence of prior permits.
Use a digital portal for draws and schedules.

Builders do not need to provide credit reports or financials, making the process straightforward.

What if my builder is already approved?

If your builder is on the approved list, most required documents are already on file, speeding up the process.

Are there specific appraisal requirements?

Yes. Appraisals are completed “subject to” the plans and specifications of the home prior to loan closing. Required items include:

Executed building plans and material descriptions.
Plot plan showing lot dimensions and setbacks.
Builder contract and lot purchase agreement (if applicable).

What are the fees associated with a VA construction loan? A:

Included Fees: Construction management fees cover the transaction’s construction aspects.
Excluded Fees: Third-party fees like appraisals, credit reports, and title fees are not included.
Interest Reserves: These are financed into the cost to build, ensuring no payments are required during construction.

What is the role of contingency funds?

A minimum 2% contingency reserve is required and included in the construction budget. It covers unexpected costs during construction. Unused funds are applied as a principal reduction to the loan at modification.

Are there options for extended rate locks?

Yes, VA construction loans offer rate locks up to 360 days with the option to float down to a lower rate if market conditions improve.

How do we support the builder during construction?

Builders benefit from VIP services, including:

A concierge service for communication and support.
Draw requests managed through a digital portal with funds wired directly to the builder.
Fast processing, with draws funded within 5 days (compared to the industry average of 14 days).

What happens if I already own the land?

If the lot is owned free and clear, equity may count as part of the veteran’s investment. If the lot has a lien, it can be paid off as part of the loan.

What is the timeline for construction?

The construction term is determined by the builder and must include a commitment to complete the home within the specified timeline to ensure the loan modification occurs on time.

Frequently Asked Questions

VA Construction Loans: Your Questions Answered

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