Can I Use The VA Loan For A New Construction Home?

If you have your eye on a piece of property and want to build the home of your dreams, you may be wondering if you can use your VA Loan benefit to buy either the property or pay for construction of the home. The answer is yes, as long as you do them together.

You cannot use the VA Loan to purchase land that you do not intend to build on. This is due to the minimum habitability requirement for a VA Loan. If there is no house, it cannot be habitable. Instead, you can do a construction loan that covers the cost of both the land and the construction. Builders and lenders are both familiar with these types of loans and know what additional paperwork you will need to submit.

Remember that you will need to qualify for the total value of the loan, including any land and construction costs. If construction costs go over, you may have to pay out of pocket if it exceeds your approved loan amount. Typically, builders have a set cost which is ironed out clearly during the buying process.

When the construction on your home is done, you will need to provide paperwork to your lender in order for the builder to get paid. The VA will also need final information about the home. Like with other VA Loans, it will need to appraise for at least the loan amount in order to work with the VA Loan. This is also done before the loan is approved and construction begins. It is based on the submitted plans and specifications of the builder. Of course, if anything changes during the construction process, it can cause problems with the loan.