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VA Home purchase Loans

Introduction to VA Construction Loans

One of the acceptable uses of VA loans is that they can be used to build a home on a piece of land. Qualified military borrowers can use VA entitlement toward a new construction mortgage.

But finding a lender willing to issue a VA construction loan can be difficult nowadays, no thanks to the recent housing collapse. Upfront construction costs also deter lenders. Even if borrowers find a lender who will issue a VA construction loan, it may not come with that important no-money-down feature that makes VA loans so attractive.

But because many lenders do not make a no-money down VA construction loan, many borrowers are getting short-term construction loans through local builders or local lenders. Once the construction comes to its end, the borrower can refinance the construction into a permanent VA home loan.

The problem with resorting to a local builder or lender for a short-term loan is that they may require a down payment. Closing costs and other expenses could arise, so it’s imperative that you compare every construction loan option.

Talk with a VA lender before getting a construction loan. You can ask builders and lenders if they can make any exceptions for military families working toward home construction. Remember that each business is vying for borrowers to be their customer. That puts borrowers in the driver’s seat, so do not rush into a construction loan agreement. Be diligent about researching businesses with customer review websites and other organizations.

Select VA lenders can turn those interim construction loans into full-blown VA home loans. A lender may handle this like a refinance or a new purchase loan. Borrowers are subject to all the VA lender’s standards regarding credit score, debt-to-income ratio, income, employment and more.

Builders must submit a one-year warranty on the construction to the lender and have a valid VA builder ID during said construction. Again, it’s wise to talk with a VA loan specialist prior to seeking a construction loan. They may know local entities that might lend you a construction loan with better terms, and VA loan specialists can certainly assist in turning a short-term construction loan into a VA loan.

It’s a good idea to get the ball rolling toward your permanent home financing long before the builder finishes building your dream home. A construction loan is a short-term loan by design, and you will need to have the long-term financing ready to go.

Compare Top VA Purchase Lenders

Take the guesswork out of finding a VA Loan provider. Veterans United created this site to educate and empower military homebuyers. Regardless of what lender you pick, it's always a good idea to compare and know your options.

  • NMLS #1907
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    • Veterans United ranks No. 1 in Customer Service for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
    • In 2016, Veterans United closed 31,956 VA Purchase Loans, which was 9% of all VA Purchase Loans closed nationwide last year.
    • VA Loans were 96.8% of the company’s total loan volume.
  • NMLS #401058
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    • USAA ranks No. 5 in Customer Service for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
    • In 2016, USAA closed 26,734 VA Purchase Loans, which was 8% of all VA Purchase Loans closed nationwide last year.
    • VA Loans were 73.9% of the company’s total loan volume.
  • NMLS #399807
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    • Navy Federal ranks No. 3 in Customer Service for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
    • In 2016, Navy Federal closed 17,477 VA Purchase Loans, which was 5% of all VA Purchase Loans closed nationwide last year.
    • VA Loans were 51.7% of the company’s total loan volume.
  • VALoans.com is a service of Veterans United Home Loans.
  • Customer Service: All ratings and reviews sourced provided by TrustPilot. VALoans.com is not affiliated with TrustPilot and has no control or influence on how users rate each lender.
  • 2016 VA Loans: Total VA loan volume for fiscal year 2016 as reported by the Department of Veterans Affairs (VA Home Purchase, VA Interest Rate Reduction Refinance, VA Cash-Out Refinance).
  • % VA Volume: Percentage of lender's total loan volume is comprised of VA Loans (source).