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As an active-duty or veteran service member or the surviving spouse of one, you may know that the Department of Veteran Affairs (VA) offers financing to help you purchase a home. But did you know that you’re also able to build your own home with a VA construction loan?

Veterans, active-duty service members, reservists, National Guard personnel, and surviving spouses, may all have the opportunity to build their dream homes.

VA construction loans are designed to create more opportunities for service members and their families, offering many incredible advantages to help build your next home.

If you’re considering building instead of buying with your VA loan, read on to understand the essentials of VA construction loans and how to utilize their advantages in building your new home.


The 411 on VA Construction Loans

The VA offers home loans and construction loans for qualifying service members in an effort to make homeownership accessible to those who have served.

To tap into a VA construction loan, borrowers must obtain a Certificate of Eligibility (COE) to prove that they qualify for a VA loan.

Obtain a COE by submitting a request to the VA either online or in the mail. Experienced VA loan lenders may also help borrowers apply for a COE.

The COE is a crucial component of any VA loan as it determines the terms of your construction loan, such as your eligibility, entitlement amount, whether you have to pay a VA funding fee, and how much of your entitlement you can use.

If you’ve used a VA loan previously, then your COE may have changed since the last time you applied for a loan.

With a VA construction loan, borrowers are also required to:

  • Work with a VA-approved contractor or builder
  • Prepare detailed construction plans and cost estimates
  • Adhere to building permits and zoning regulations
  • Establish a contract with an approved builder
  • Have VA appraisals and inspections completed
  • Follow primary residency requirements for the VA

It’s important to work closely with a VA-approved lender and builder who has experience with these loans and can help you navigate the process effectively. Their knowledge and experience will ensure the construction and quality of your home meet all the requirements and guidelines.


Advantages of VA construction loans

Let’s review the top advantages of VA construction loans, from competitive rates to low or no down payments, these loans can allow service members to build their homes with ease.

Low interest rates

With the potential for a lower interest rate, borrowers can expect a more affordable monthly mortgage payment, making homeownership more accessible. With a smaller monthly payment, borrowers who are able to pay more each month can make extra payments toward the principal, which could lead to an earlier payoff of the mortgage.

One-time closing

Some construction loans only cover the cost of construction, typically resulting in borrowers having to take on another home loan to cover the principal of the construction loan, resulting in two loans combined.

VA construction loans are construction-to-permanent loans, so you only have to apply and close on your loan once. The simplified process gives borrowers their money and time back, as you only have to go through the application and closing process once.

Flexible requirements

If you have poor credit or are low on savings, you can still apply for a VA construction loan. Whereas these factors can determine a borrower’s eligibility for other construction loans, some VA lenders have more flexible credit scores and down payment requirements.

They may also be flexible with your debt-to-income ratio, which can be helpful for borrowers with other financial obligations.

Little to no down payment

One of the most noteworthy advantages of VA construction loans is that they typically do not require a down payment. Eligible veterans and active-duty service members may often finance most of the construction costs, making it possible to build a new home without making a down payment.

Other construction loans may require 10-20% of your loan as a down payment, which can be a monumental amount of savings for qualifying service members.

Customizable homes

With VA construction loans, you can build the home of your dreams—there is no official loan amount limit set by the VA. However, the FHFA’s conforming loan limits are often followed.

This means you may be able to build a home with a VA construction loan starting at $726,000 without needing a jumbo loan for financing.

VA inspections

All VA construction loans will require you to obtain an inspection by a qualified VA inspector. While this can add to the timeline and process, it gives you peace of mind by double-checking the condition of the home.

Refinancing available

Once construction is complete and your construction loan transfers into your permanent home loan, you may be able to change the loan terms or interest rate through refinancing.

You may even be eligible for a cash-out refinance, meaning that you can take cash out of the home’s equity to use for various purposes. While you must meet specific criteria, it’s something to consider when thinking of future investments.

No private mortgage insurance

VA construction loans typically don’t require private mortgage insurance, also known as PMI, which is often required with conventional loans.

Private mortgage insurance comes in two forms for borrowers with a conventional home loan: an upfront fee and an ongoing monthly cost.

The absence of PMI means VA borrowers save money upfront and, in the long run, which makes building your own home even more affordable.


Apply online for a VA construction loan with The Federal Savings Bank

VA construction loans make building your home an attainable goal.

Start the process by applying online with The Federal Savings Bank.

We’re veteran-owned and operated and we understand the intricacies of VA loans and their requirements.

We strive to help make everyone’s path to homeownership as easy and accessible as possible.

Whether you’re building, buying, or refinancing, the experienced team at The Federal Savings Bank has your back.


Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property.

Down payment assistance requirements are based on the mortgage insurer or guarantor’s guidelines. Borrower may fund down payment and closing costs.  Down Payment Assistance Program, which assist eligible homebuyers with purchasing a home.  Down payment assistance programs are not eligible for all potential homebuyers.

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner. For tax advice, please consult a tax professional.

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.