HOUSINGVA program
VA Construction Loan
A VA-backed purchase loan, through a private lender, used to build a new home you will live in. Since Circular 26-25-1 (March 31, 2025), new and proposed homes no longer need a VA builder ID, and VA has not done its own compliance inspections since February 2006; it relies on local building inspections and 1-year or 10-year construction warranties.
Available with a VA home loan Certificate of Eligibility
Step-by-step guide
What you get
A VA-backed purchase loan used to build a new home that you will live in, on land you own or buy with the loan. A private lender makes the loan, and VA backs part of it.
What VA looks for: a home you will build and live in
- A COE, and a home you will live inThe same COE used to buy a home shows your lender that you have the home loan benefit. You also certify that you plan to live in the home once it is built.
- Credit and income that meet VA and lender standardsVA's credit and income standards apply, and lenders may add their own. If your rate can float during the build, your agreement sets a highest rate, and you must meet the standards at that rate.
- A value VA sets from the plansYour lender orders a VA appraisal based on the plans and specifications, if it can be done before the foundation is finished. Past that point, the appraisal waits until the home is done. With a two-time close, the lender may order the appraisal again once the home is built. The loan cannot be more than VA's value, and you pay any difference in cash.
- Land for the homeYou can build on land you already own, or buy the land as part of the loan. Loan money can also pay what you still owe on the land. Your title must be one that title companies and attorneys in your area would accept.
Source: VA.gov: VA-backed purchase loan (opens in new tab); VA.gov: how to request a VA home loan COE (opens in new tab); 38 CFR 36.4303(g) (opens in new tab); 38 CFR 36.4340 (opens in new tab); VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); 38 CFR 36.4339(a) (opens in new tab); 38 CFR 36.4354(a) (opens in new tab)
Where are you in the build?
- Getting a loan to build
VA lists building a new home as one use of its VA-backed purchase loan. A private lender makes the loan, and VA backs part of it. Not all lenders make VA construction loans, so you may need to ask several.
Source: VA.gov: VA-backed purchase loan (opens in new tab); VA Home Loans: purchase and cash-out refinance loans (opens in new tab); VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab)
- A problem with the builder
VA backs the loan, not the condition of the home, and VA appraisers are not home inspectors. Since March 31, 2025, VA points you to resources for builder complaints instead of stepping in.
- The builder's warranty and your contractVA rules call for a written warranty that the home was completed to the plans and specifications VA valued. Your contract and warranty set what the builder must fix. VA says most builder warranties cover defects for at least 12 months.
- A record of the problemVA suggests a clear written summary of the problem. Keep every message with the builder, with dates, times, and who you spoke with, plus photos and any inspector or third-party reports.
Source: VA.gov: how to resolve a dispute with your builder (opens in new tab); VA Circular 26-25-1 (opens in new tab); 38 CFR 36.4367 (opens in new tab)
What to gather, and what it shows VA
| Document | What it shows | How VA gets it | Have it? |
|---|---|---|---|
| Your COE The certificate VA issues for the home loan benefit. | That you have the home loan benefit | Request it online on VA.gov, through your lender, or by mail on VA Form 26-1880. Show it to your lender. | Yes |
| Income, savings, and credit records Records of your income, savings, and debts that the lender asks for. | That the payments fit your income | They go to the lender, not to VA or BeneVets. Your lender may ask for more papers before closing. | Yes |
| Plans, specifications, and the building contract The plans and specifications for the home, and your signed contract with the builder. | What will be built, and the cost VA compares with its value | Your lender uses the plans and specifications to order the VA appraisal. If you sign the contract before VA's value is known, it needs a clause that lets you cancel without losing your earnest money if the cost is above that value. | Yes |
| Papers for the land Papers that show you own the land, or the agreement to buy it with the loan. | Where the home will be built, and your title to the land | They go to your lender, not to VA or BeneVets. If you still owe money on the land, the loan can pay that balance. | Yes |
| The builder's written warranty A written warranty, in the form VA sets, that the home was completed to the plans and specifications VA valued. | What the builder must fix | The builder, seller, or other party to the sale gives it to you, and a copy you sign for goes in with the loan papers. Keep it with your construction contract. | Yes |
| Your record of the problem A written summary of the problem, notes of every contact with the builder, photos that show the problem, and any inspector or third-party reports. | What is wrong, and what you have done to get it fixed | You keep these yourself and use them when you contact the builder or anyone helping you. They do not go to VA or BeneVets. |
Loan papers go to your lender, and the COE request goes to VA. BeneVets does not ask for copies of them.
Steps, in order
- Request your COE
Request it online on VA.gov, ask your lender to request it for you, or mail VA Form 26-1880 to your regional loan center.
Source: VA.gov: how to request a VA home loan COE (opens in new tab); VA Form 26-1880 (opens in new tab)
- Get free help with the COE request
Free help: an accredited VSO can file this with you. Find one near you in the BeneVets VSO directory at Find an accredited VSO near you. VA home loan representatives also answer questions at 877-827-3702, Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.
Source: VA.gov: accredited representatives (opens in new tab); 38 CFR 14.627(h) (opens in new tab); VA Home Loans: contact us (opens in new tab); VA.gov: how to request a VA home loan COE (opens in new tab)
- Find a lender that makes VA construction loans
Not all lenders make them. Rates and fees differ, so compare several, and ask each one whether it offers a one-time close or a two-time close.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); VA.gov: buying a home with a VA-backed loan (opens in new tab)
- Choose a licensed builder
VA no longer issues builder ID numbers for new homes, but builders are still expected to meet state and local licensing rules. Your lender reviews the builder as part of the loan and may set its own limits.
Source: VA Circular 26-25-1 (opens in new tab); VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab)
- Sign the building contract
Read the contract and the warranty terms before you sign; they set what the builder must fix later. If you sign before VA's value is known, include the clause that lets you cancel without losing your earnest money if the cost is above that value. Upgrades you pay for ahead of time are often not refundable, and that clause does not cover them.
Source: 38 CFR 36.4303(k) (opens in new tab); VA.gov: how to resolve a dispute with your builder (opens in new tab); VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab)
- Get the VA appraisal from the plans
Your lender orders a VA appraisal based on the plans and specifications, and VA sends you and your lender a Notice of Value, which shows VA's value for the home. With a two-time close, the lender may order it again once the home is built. Where there are no similar homes nearby to compare, your lender can ask the appraiser to also estimate the value from building costs.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); VA.gov: VA funding fee and closing costs (opens in new tab)
- Close the loan
With a one-time close, the loan closes before building starts, and the funding fee is due then unless you are exempt. With a two-time close, the VA loan and its funding fee come at the second closing, after the home is built.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); VA.gov: VA funding fee and closing costs (opens in new tab); 38 CFR 36.4313(e)(5) (opens in new tab)
- Approve each payment to the builder
With a one-time close, the money for the build is held in an escrow or draw account and paid to the builder as work goes on. Your lender must get your written approval before each payment.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab)
- When the home is finished
A final inspection or certificate of occupancy marks the end of the build. With a one-time close, your lender then changes the loan to its permanent terms; with a two-time close, the VA loan closes and replaces the first loan. With a one-time close, the first payment of principal can be put off while the home is built, but the loan still ends on its original date, so you and your lender choose between slightly larger payments and a larger final payment.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); VA Home Loans: purchase and cash-out refinance loans (opens in new tab)
- If something is wrong with the build
Report it to the builder, warranty company, or manufacturer right away, and give them a reasonable time to fix it. If that fails, you can go to a higher-level manager, a state or local home builders association, a consumer protection office, the Better Business Bureau, or the FTC. A construction lawyer, small claims court, and the free legal clinics at some VA facilities are other options.
Source: VA.gov: how to resolve a dispute with your builder (opens in new tab); VA Circular 26-25-1 (opens in new tab)
Good to know
VA's purchase loan page lists building a new home as a use of the loan. If a builder pays for construction with its own money, that is not a construction loan: you can use a VA purchase loan to buy the finished home from the builder.
Source: VA.gov: VA-backed purchase loan (opens in new tab); VA Home Loans: purchase and cash-out refinance loans (opens in new tab); VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab)
With a one-time close, the construction loan and the permanent VA loan close together before building starts, and the lender changes the loan to its permanent terms when the home is done. With a two-time close, a first loan that is not a VA loan pays for the build, and a VA loan replaces it once the home is done. Before that second closing, the lender checks your credit and income again and may order a new appraisal. VA's cash-out refinance is a separate way to replace a construction loan with a permanent VA loan.
Source: VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab); VA Home Loans: purchase and cash-out refinance loans (opens in new tab)
Since March 31, 2025, a builder needs no VA builder ID number for a new or proposed home; one is still needed for a Specially Adapted Housing grant or a Native American Direct Loan (NADL). Builders are still expected to meet state and local licensing rules. VA stopped its compliance inspections of new homes in February 2006 and relies on local building inspections and construction warranties of 1 or 10 years.
On VA's chart for purchase and construction loans, effective April 7, 2023, first use costs 2.15% with less than 5% down, 1.5% with 5% or more down, and 1.25% with 10% or more down. After first use, the rate with less than 5% down is 3.3%, and the other two stay the same. No fee for a veteran who receives VA compensation for a service-connected disability, or who would but gets retirement or active-duty pay instead. Also exempt: a surviving spouse receiving DIC, a service member with a pre-discharge proposed or memorandum rating issued before closing, and an active-duty Purple Heart recipient who shows proof by closing. If VA later awards compensation with an effective date before your closing, you can ask your VA regional loan center about a refund.
Source: VA.gov: VA funding fee and closing costs (opens in new tab); 38 CFR 36.4313(e)(5) (opens in new tab)
On a construction and permanent loan, only the funding fee can be added to the loan; other fees and charges are paid when the loan closes. Many lenders charge a 1% flat fee. When the lender pays out most of the loan (51 percent or more) in stages during the build, VA rules let it charge up to 2 percent of the loan for overseeing those payments, on top of the flat fee. Builders can offer credits toward closing costs. VA limits seller concessions, such as paying your funding fee or debts, to 4% of the home's reasonable value.
Source: VA.gov: VA funding fee and closing costs (opens in new tab); VA.gov: buying a home with a VA-backed loan (opens in new tab); 38 CFR 36.4313(d) (opens in new tab)
BeneVets is informational and is not an accredited representative. Free help: an accredited VSO can work through VA benefits with you at no cost. Find an accredited VSO near you
Sources checked October 16, 2026: 38 CFR 14.627(h) (opens in new tab), 38 CFR 36.4303(g) (opens in new tab), 38 CFR 36.4303(k) (opens in new tab), 38 CFR 36.4313(d) (opens in new tab), 38 CFR 36.4313(e)(5) (opens in new tab), 38 CFR 36.4339(a) (opens in new tab), 38 CFR 36.4340 (opens in new tab), 38 CFR 36.4354(a) (opens in new tab), 38 CFR 36.4367 (opens in new tab), VA.gov: VA-backed purchase loan (opens in new tab), VA.gov: how to request a VA home loan COE (opens in new tab), VA.gov: VA funding fee and closing costs (opens in new tab), VA.gov: buying a home with a VA-backed loan (opens in new tab), VA.gov: how to resolve a dispute with your builder (opens in new tab), VA.gov: accredited representatives (opens in new tab), VA Home Loans: contact us (opens in new tab), VA Circular 26-25-1 (opens in new tab), VA Home Loans: purchase and cash-out refinance loans (opens in new tab), VA Home Loan Guaranty Buyer's Guide (April 2022) (opens in new tab), VA Form 26-1880 (opens in new tab)