New Construction and VA Construction Loans

Two ways to get a new home

There are two main paths:

1. Buy a home a builder has already finished or is building in a subdivision. You close once, after it is done. This is the most common way.
2. Build your own home on land you own or are buying, using a VA construction loan that funds the build and then turns into a regular VA mortgage. This is often called a construction-to-permanent or "one-time close" loan.

What changed in 2025

For years, builders needed a VA Builder Identification Number (BIN) before VA would value their homes. VA Circular 26-25-1, issued March 31, 2025, dropped that rule for most loans. Builders no longer need a BIN to sell homes to VA buyers, which opens up more builders to Veterans. BINs are still needed for Specially Adapted Housing grants and Native American Direct Loan construction on trust land. VA also stopped handling most builder complaints; those now go to local authorities or the courts.

Buying from a builder

• The home still needs a VA appraisal and must meet Minimum Property Requirements.
• For homes not yet finished, the appraisal may be based on plans and specs, with inspections later to confirm the work.
• New homes usually need proof of a warranty or other inspections, depending on the stage.
• Builder incentives can help pay your closing costs. Extras beyond normal costs count toward the 4% seller concession cap.
• Watch for builder-affiliated lenders. They may offer perks, but compare their rate and fees with other lenders.

Building your own home with a VA construction loan

A VA construction loan pays the builder in stages, called draws, as the work gets done. When the home is finished, the loan becomes your normal VA mortgage. Key points:

• Few lenders offer true VA construction loans. You may need to search.
• The lender will usually want a licensed, insured builder with a good track record, plus a signed contract, plans and a budget.
• The VA appraisal is done on the plans before building starts.
• VA allows the lender to charge up to a 2% fee for supervising construction draws, in addition to the 1% flat charge, when most of the money is paid out during building.
• The funding fee is the same as a purchase.
• You must plan to live in the home when it is done.

Step by step: VA new construction

1. Get your COE and preapproval. Ask whether the lender does VA construction loans if you plan to build.
2. Pick a builder. Check licensing, reviews and past VA or FHA work.
3. Sign the contract with the VA escape clause and a clear timeline.
4. Order the VA appraisal based on the plans.
5. Close on the loan (for one-time close) or wait until completion (for a builder's spec home).
6. Track inspections and draws during building.
7. Final inspection and certificate of occupancy.
8. Move in and start regular payments.

Things to watch

• Delays: Building often runs late. Ask what happens if your rate lock or contract expires.
• Change orders: Upgrades during the build can raise the price above the appraised value.
• Land: If you already own land, its value may count toward your equity.
• Separate construction loans: Some Veterans use a non-VA short-term construction loan, then refinance into a VA loan. This can cost more and adds a second closing.

Bottom line

New construction is more open to VA buyers than ever thanks to the 2025 Builder ID change. If you want to build your own home, start your lender search early, because true VA construction lenders are scarce.