From TIME:

VA construction loans are designed to help eligible service members build their ideal home by providing financing for both the construction and the land it’s built on. The loans offer benefits such as low or no down payment, competitive interest rates, and flexible disbursement of funds during the construction process.

To qualify for a VA construction loan, applicants must be U.S. military veterans, active-duty service members, or surviving spouses, and provide documentation including proof of income, credit history, a credit score of at least 620, and a debt-to-income ratio of 41% or less. The Department of Veterans Affairs guarantees a portion of the loan, and the new home must be the applicant’s primary residence.

There are two types of VA construction loans: single-close loans, which cover the cost of the lot, construction, and mortgage with one loan; and two-time close loans, which only cover the cost of construction and require a second loan once the project is complete.

Finding a lender who offers VA construction loans can be challenging, and even lenders who offer other types of VA loans may not offer construction loans. The process involves research, pre-approval, working with a VA-approved builder, and completing the loan application.

VA construction loans offer competitive interest rates and more lenient lending criteria compared to traditional home loans, making them an attractive financing option for eligible borrowers. However, they are not as commonly used as traditional home loans, which can make finding a lender more difficult.



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