Understanding VA Construction Loans and Top Lenders

What is a VA Construction Loan?

A VA construction loan is a loan type that allows eligible veterans and service members to finance the construction of a new home. Unlike standard VA loans that are used to purchase existing homes, VA construction loans cover the cost of building a home from the ground up. These loans can be structured as one-time close loans — which combine the construction loan and permanent financing into a single loan — or as two-time close loans, where the construction loan and permanent mortgage are handled separately.

Key features of VA Construction include:

No Down Payment:

One of the most appealing features of VA construction loans is the possibility for borrowers to finance their home without a down payment. This significant benefit reduces the barrier to entry for many veterans and active service members, allowing them to begin construction without the often substantial upfront financial burden typical of other loan types.

Competitive Interest Rates:

VA construction loans typically offer competitive interest rates, which can result in lower monthly payments and more affordable borrowing costs overall. These favorable rates are part of the VA's efforts to provide financial benefits to those who have served, making homeownership more accessible and financially manageable.

Flexible Guidelines:

The VA construction loan program stands out for its flexible underwriting guidelines. These guidelines are generally more accommodating than those associated with conventional construction loans, offering leniency in areas like credit scores and debt-to-income ratios. This flexibility makes it easier for more veterans to qualify for loans and start building their homes.

Builder Freedom:

With VA construction loans, borrowers have the freedom to select their own builders. However, it's important to note that the chosen builder must be VA-approved. This requirement ensures that the builder meets certain standards of reliability and quality, which helps protect the borrower's investment while still allowing them the freedom to work with a contractor of their choice.

10 Top Performing VA Construction Loan Lenders

1. PenFed Credit Union

PenFed Credit Union offers VA construction loans with both one-time and two-time close options, catering to a broad membership base. They focus on providing customized financial solutions tailored to meet the specific construction needs of their clients. PenFed’s approach prioritizes financial efficiency and satisfaction, ensuring a smooth journey throughout the home-building process​

2. USAA

USAA is deeply committed to serving military families, offering a suite of financial services that includes VA construction loans. These loans are designed to provide a smooth and supportive experience from start to finish. USAA's customer-centric approach ensures that military members receive comprehensive support throughout the construction process, underlining their reputation as a dependable financial provider for veterans and their families.

3. Navy Federal Credit Union

Navy Federal Credit Union offers VA construction loans to a broad spectrum of military personnel, extending well beyond the Navy. Known for their favorable terms, these loans are tailored to the unique circumstances of military members, making homeownership more achievable. Navy Federal's inclusive and flexible eligibility criteria allow it to serve a diverse military population, making it a versatile and popular choice for those looking to construct their own home.

4. Flagstar Bank

Flagstar Bank provides multiple loan options including VA construction loans. They offer interest-only payments during construction, which can help manage cash flow during the building process. Flagstar is known for its unique loan options and flexibility, making it an attractive choice for veterans looking to build their homes​.

5. New American Funding

New American Funding offers a variety of loan products including VA construction loans. They emphasize assisting underserved communities and provide options tailored to first-time homebuyers, military members, and those with unique financial situations. Their commitment to customer satisfaction and comprehensive service makes them a notable choice for VA construction loans.

6. PrimeLending

PrimeLending is known for providing flexible construction loan options, including those backed by VA guarantees. They are committed to meeting the diverse needs of their clients, including veterans facing unique or complex construction challenges. PrimeLending’s focus on flexibility and extensive choice makes them a noteworthy provider for those exploring VA construction loans​.

7. Veterans United Home Loans

Veterans United Home Loans, while not directly offering VA construction loans, assists veterans in obtaining traditional construction loans and then refinancing into VA loans. They provide detailed guidance throughout the process, helping veterans navigate the complexities of financing home construction.

8. Fairway Independent Mortgage Corporation

Fairway Independent Mortgage Corporation offers extensive services in VA loans, including options for construction loans. They are recognized for their comprehensive approach, which simplifies the transition from construction loans to permanent mortgages. Fairway’s focus on client education and support underscores their commitment to providing thorough and informative financial services to veterans​.

9. LendingTree

LendingTree helps connect borrowers with VA construction loan lenders and provides detailed guidance through the application and construction process. Their platform allows veterans to compare multiple loan offers, ensuring they find the best terms and rates for their construction needs​.

10. The Federal Savings Bank

The Federal Savings Bank offers VA construction loans and provides detailed support throughout the construction process. They emphasize making the home-building journey manageable by breaking down the process into key steps, from obtaining a Certificate of Eligibility to finalizing the loan and starting construction. Their comprehensive service makes them a reliable choice for veterans looking to build their homes​.

Choosing the Right VA Construction Loan Lender

When selecting a lender for a VA construction loan, consider factors such as the lender’s experience with VA loans, customer service reputation, and the flexibility of loan terms. It’s also important to consult with lenders who specifically offer VA construction loans, as not all VA lenders provide this service. Always compare offers from multiple lenders to ensure you get the best terms suited to your financial needs and construction goals.

By understanding the basics of VA construction loans and exploring reputable lenders, eligible veterans and service members can take significant steps toward building their own homes with favorable loan terms.