VA construction loans can help qualified Veterans finance the purchase of land and the construction of a brand-new home without the need for a down payment.
VA construction loan lenders are challenging to come by. True, $0 down VA construction loans arent incredibly common in todays lending climate. Many lenders, including Veterans United, do not currently offer this kind of financing.
The good news is that there are still options for Veterans to build their dream home and utilize their VA loan benefit.
If you’re a veteran looking to build your dream home, a VA construction loan can help make it possible. VA construction loans allow eligible veterans and service members to finance the construction of a new home without requiring a down payment.
With the limited housing inventory in today’s market, more and more veterans are turning to new construction to build their ideal home But finding a lender that offers VA construction loans can be tricky. Not all lenders provide this kind of specialized financing.
To help you find the best VA construction loan lender, I reviewed and ranked the top companies offering these loans in 2023. I evaluated lenders on criteria like loan terms, fees, customer service, eligibility, and reputation.
Here are the 8 best VA construction loan lenders to consider this year
1. Veterans United Home Loans
Veterans United is one of the largest and most well-known VA lenders in the country. They stand out for their excellent customer service, competitive rates, and streamlined online process.
While Veterans United does not currently offer true VA construction loans, they do provide permanent VA financing that can be used in conjunction with a separate construction loan. Their VA Purchase and Cash-Out Refinance loans allow you to take over financing once construction is complete.
Key features:
- Online applications, document upload, and eClosing
- Low VA funding fees
- Rate locks up to 180 days
- No down payment required
- Fast preapprovals in 2-3 days
Eligibility: Available to all qualifying VA borrowers nationwide
2. Navy Federal Credit Union
As the largest credit union in the world, Navy Federal offers great rates to its members. They provide both construction-only and construction-to-permanent VA loans.
Their construction loans feature an easy application process and fixed rates. You’ll work with a dedicated loan officer throughout the building process. Navy Fed also lets borrowers act as their own general contractor.
Key features:
- Fixed rates and payments
- Up to 12 months to complete construction
- Option to be your own general contractor
- Streamlined application process
- Available nationwide
Eligibility: Membership is required. Join by opening a savings account.
3. New American Funding
New American Funding provides flexible VA construction loan options across 47 states. Their Stage Advantage program lets you lock in your rate upfront for the permanent mortgage.
You can apply and upload documents completely online. New American Funding offers both construction-only financing and construction-to-permanent loans. They have over 20 years of experience with VA loans.
Key features:
- Construction-only and construction-to-permanent options
- Float-down rate lock available
- Online applications and document upload
- In-house underwriting
Eligibility: Must meet VA borrower requirements; available in most states
4. Fairway Independent Mortgage Corporation
Fairway Independent Mortgage is a nationwide lender that provides VA construction financing. Their VA construction loans feature fixed rates and lets borrowers act as their own general contractor.
Fairway has over 400 branches across the U.S. and has been in business since 1996. Their loan officers have specialized VA training to guide you through the construction process.
Key features:
- Fixed rates and payments
- Option to act as your own contractor
- Online applications and document upload
- Local loan officers available
- Fast turn times
Eligibility: Must meet VA borrower requirements; available nationwide
5. PenFed Credit Union
As one of the largest credit unions, PenFed offers VA construction loans with competitive rates. PenFed has financed over $3 billion in VA loans.
Their program includes both construction-only financing and a one-time close construction-to-permanent option. Fees are limited and underwriting is handled in-house for faster processing.
Key features:
- Construction-only and one-time close options
- Low fees and closing costs
- In-house underwriting
- Online applications
- Float-down rate locks
Eligibility: Membership is required. Join by opening a savings account.
6. Guild Mortgage
Headquartered in California, Guild Mortgage is a growing national lender offering VA construction loans in multiple states.
They allow borrowers to act as their own general contractor. Guild also provides financing for off-grid construction projects. Their local loan experts can guide you through the VA building process.
Key features:
- Option to act as your own contractor
- Off-grid construction financing available
- Fixed rates and payments
- Local mortgage consultants
- A+ rating with the Better Business Bureau
Eligibility: Available in AZ, CA, CO, FL, NV, OR, TX, WA
7. Prospect Mortgage
Prospect Mortgage is a national lender licensed in all 50 states. They offer construction-only financing along with single close construction-to-permanent VA loans.
You’ll work with the same dedicated loan officer from application to closing. Float down options allow you to take advantage of lower rates later on. Prospect Mortgage has over two decades of experience with VA loans.
Key features:
- Construction-only and one-time close options
- Dedicated loan officers
- Float down rate locks available
- Low down payment options
- Fully licensed nationwide lender
Eligibility: Must meet VA borrower requirements; available nationwide
8. Freedom Mortgage
Freedom Mortgage is a top 10 mortgage lender that provides VA construction loans in over 40 states. Their program includes both construction-only and single close options with fixed rates.
They offer a streamlined application process with online document upload. You can also choose to act as your own general contractor to potentially save on construction costs.
Key features:
- Construction-only and single close loans
- Act as your own general contractor
- Online applications and document upload
- Fixed rates and payments
- Over 25 years of mortgage experience
Eligibility: Must meet VA borrower requirements; available in 40+ states
How Do VA Construction Loans Work?
VA construction loans function a bit differently than typical VA purchase or refinance loans. Here’s a quick rundown of how the process works:
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Get prequalified: Work with a lender to get preapproved for a VA construction loan and determine your maximum loan amount.
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Find a builder: Identify a registered VA builder to construct the home. The lender must approve the builder.
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Submit plans: Provide complete building plans and specifications for the lender to review and get appraised.
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Close loan: Finalize the construction loan closing and establish a disbursement schedule.
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Draw payments: The lender will distribute “draws” from your total loan amount to the builder at certain stages.
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Complete construction: Once construction is finished, arrange for permanent VA financing from the same lender or a new one.
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Move in: The home must pass a final inspection before you can move in and occupy the property.
What Are the Benefits of a VA Construction Loan?
VA construction loans offer home buyers several advantages compared to conventional construction loans:
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No down payment required: VA loans don’t require any down payment in most cases. This helps make new construction more affordable.
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No PMI: Veterans don’t have to pay private mortgage insurance with a VA home loan. This can save you hundreds per month.
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Lower rates: VA mortgage rates are very competitive, especially compared to other no down payment loan options. This makes financing more affordable.
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Flexible credit guidelines: VA has more lenient credit standards than conventional loans. Minimum 620 credit score is often required.
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One-time close options: This avoids having to get two separate loans for the construction loan and permanent mortgage.
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Veteran-friendly: The VA construction loan process is designed to meet the unique needs of veterans and service members.
Tips for Getting Approved for a VA Construction Loan
While VA guidelines are flexible, getting approved for a construction loan does require some preparation. Here are some tips:
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Have a credit score of at least 620 or higher
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Keep your debt-to-income ratio below 50%
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Show stable income that can support the mortgage payment
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Provide proof of funds for closing costs if needed
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Find a reputable local builder familiar with VA guidelines
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Research and prepare for additional construction fees and closing costs
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Be ready to provide construction plans, permits, builder bids and other documentation
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Get prequalified early and lock in your interest rate
Alternatives to VA Construction Loans
If you have trouble finding a lender that provides VA construction financing, here are a few alternative options to consider:
VA land loan + traditional construction loan: You may be able to combine a VA purchase loan for the land with a separate construction loan for building the home.
VA cash-out refinance: If you already own land, you could do a VA cash-out refinance to tap your home equity for construction funds.
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Start with a Construction Loan
Veterans unable to find a lender willing to do a VA construction loan can look to get a traditional construction loan and transition that to a VA loan after closing.
Getting a traditional construction loan often requires a down payment. However, it may be possible to recoup the down payment in some cases.
When searching for a construction loan, it can pay to shop around. Talk with multiple builders and financial institutions and compare down payment requirements, closing cost estimates and more.
Some builders may have programs or deals, especially for Veterans and military families. Do your homework and make sure youre working with a legitimate builder with a track record of success and satisfied homeowners.
Veterans and military members who own the land they want to build on may be able to use any equity they have toward down payment requirements for construction financing.
Veterans who dont already own land can often include purchasing it in their overall construction loan.
Its important to understand that construction loans are short-term loans. That means Veterans and military members must start working on the permanent financing as early as possible.
What is the VA Construction Loan Process?
Every homebuyer’s situation looks different, depending in part on the lender they’re working with, the home builder and a host of other factors.
Generally, the process follows along these lines:
VA One-Time Close :: How To Get A Construction Loan With A VA Loan
FAQ
What is the minimum FICO score for a VA construction loan?
How long does a VA construction loan take?
Does USAA offer VA construction loans?
Can a VA construction loan help you build a home?
A U.S. Department of Veterans Affairs (VA) construction loan can be a good option to help provide the financing you need to build the home you want, including the land it sits on.
What types of construction loans does the VA offer?
The VA offers two types of construction loans for you to consider: One-time close loans: As a form of construction-to-permanent loan, the one-time close loan covers all of your construction costs and then automatically converts to a “permanent” mortgage once the build is complete.
How much does a VA construction loan cost?
Currently, the rate for first-time VA loan borrowers is 2.30%, while the rate for repeat borrowers is 3.60%. You may also pay a lender fee, so it’s an important question to ask. You must meet service and financial requirements to qualify for a VA construction loan. Service requirements vary, but here are a few of the basics:
What is a good credit score for a VA construction loan?
To improve your eligibility chances, aim for a minimum credit score in the 620 to 640 range,” Aragon recommends. In addition: Prepare to verify two years of income when applying for a VA construction loan. For W-2 borrowers, gather the last 60 days of pay stubs, the last two years of W-2s, and your last two annual tax returns.