VA Construction Loans: Combining Your VA Benefit with New Construction

A VA construction loan is a mortgage that combines the VA loan guaranty with financing to build a new home. It is available to eligible active-duty service members, veterans, and certain surviving spouses, and can often convert to permanent financing after construction.

Eligibility is based on military service history, the same as a standard VA loan. The borrower must obtain a Certificate of Eligibility, intend to occupy the home as a primary residence, and work with a builder who meets VA requirements.

A regular VA loan finances an existing home with a lump sum at closing. A VA construction loan finances the building of a new home, with funds disbursed in stages as construction progresses. The VA construction loan also involves additional requirements for the builder and the construction project.

Yes, VA construction loans can often convert to permanent financing after construction is complete. In a construction-to-permanent structure, the conversion happens automatically, which means the borrower does not need to obtain a separate permanent mortgage.

You may want to ask about the lender’s experience with VA construction lending, the builder requirements, how draws work, whether the loan converts to permanent financing, and how the VA funding fee applies. A loan officer can guide you through each of these topics.