For many veterans and active-duty service members, the idea of building a custom home represents more than just a financial investment. It’s the fulfillment of a long-awaited dream. After years of permanent change of station (PCS) moves, apartment hopping and temporary housing, the prospect of creating a “forever home” tailored to your family’s needs can be both exciting and empowering. If you’re exploring this path, you may be wondering: Can I use a Veterans Affairs (VA) loan to build a home from the ground up?
The short answer is yes, but the process comes with important considerations. In this post, we’ll break down how a VA loan can be used to build a home, what makes the process different from a traditional home purchase and how working with a knowledgeable lender like The Federal Savings Bank can make all the difference.
Understanding VA Loans for New Construction
VA loans are backed by the U.S. Department of Veterans Affairs and designed to make homeownership more accessible to those who have served. Most people associate them with buying existing homes, thanks to loan guidelines like no required down payment and no private mortgage insurance (PMI). But fewer realize that VA loans can also be used for new construction under the right circumstances.
To use a VA loan to build a home, you typically have two main options:
VA Construction Loan (One-Time Close Loan): This is a loan that covers both the construction costs and the permanent mortgage. It’s a process that only involves one closing, saving time and money.
Construction-to-Permanent Loan with a Refinance: Some borrowers choose to use a conventional or builder-financed construction loan first and then refinance into a VA loan once the home is complete.
Each route has its pros and cons, but many buyers prefer the one-time close option so they don’t have to go through the loan process twice and pay two sets of closing costs.
Why Many Lenders Don’t Offer VA Construction Loans
Here’s the catch: not all lenders offer VA construction loans, and that’s often where confusion and frustration begin.
Why? These loans are considered riskier and require lenders to meet specific VA guidelines, such as working only with VA-approved builders and meeting inspection timelines. Because of these extra steps, many lenders simply opt out of offering this option altogether.
That’s where working with a lender who does offer VA construction loans, like The Federal Savings Bank, becomes crucial. We understand the unique needs of military families and have built our process around making VA construction loans as accessible and straightforward as possible.
Key Benefits of Using a VA Loan to Build a Home
If you qualify and work with an experienced lender, a VA loan can make building your dream home significantly more affordable. Some of the loan highlights include:
$0 Down Payment: Just like with a VA purchase loan, you can finance 100% of your home’s cost with no down payment required.
No PMI: This can save you hundreds of dollars a month compared to other loan types.
Competitive Interest Rates: VA loans often offer lower rates than conventional options.
More than just financial advantages, these terms can mean peace of mind. Instead of compromising on a resale home that doesn’t meet your needs, you can build exactly what works for your family, whether that means a home office, accessible design for a wounded warrior or a backyard your kids can grow up in.
What to Expect During the VA Construction Loan Process
Using a VA loan to build your home involves a few extra steps compared to buying an existing property. Here’s a simplified overview:
Prequalification: You’ll get prequalified for your VA loan, just like you would with a purchase.
Select a VA-Approved Builder: Your builder must be registered with the VA and meet their requirements.
Finalize Plans and Budget: Work with your builder and lender to finalize your construction plans, budget and timeline.
Loan Closing: Once everything is approved, your one-time close loan will be issued. Funds are released in stages as construction progresses.
Move In: When construction is complete and the home passes a final VA inspection, the loan converts into your permanent mortgage.
While this process may seem daunting, it doesn’t have to be. With a knowledgeable and experienced team, you can stay focused on your dream home and not on red tape.
Building a Future You Can Call Home
If you’ve been dreaming of a home that reflects your family’s journey, your values and your future, don’t let the myths about VA construction loans hold you back. With the right knowledge and a supportive lender, you can use your VA loan to build the home you’ve always wanted.
Ready to build your forever home? Contact one of our mortgage bankers to help guide you through the process, from preapproval to the day you turn the key.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
