Many veterans and service members in Hampton Roads know the VA home loan as a way to buy an existing house. Fewer know that the same benefit can be used to build a new one. The U.S. Department of Veterans Affairs lists "build a new home" as one of the approved uses of a VA-backed purchase loan.
Building with a VA loan takes more coordination than buying a finished house, and not every lender offers it. This guide explains how VA construction financing works, what the VA expects from the builder and the property, and how to prepare if you are thinking about building on a lot in Suffolk, Chesapeake, Virginia Beach, Isle of Wight County, or elsewhere in the region.
This article is general education, not lending advice. Your lender and the VA set the actual requirements for your loan.
Yes, a VA Loan Can Be Used to Build
VA.gov states that a VA-backed purchase loan can be used to buy a single-family home, buy a home and improve it, buy a manufactured home or lot, and build a new home. Like any VA-backed purchase loan, the home must be your primary residence, and you need a Certificate of Eligibility (COE) and must meet the lender's credit and income standards.
The VA does not lend the money directly in most cases. It guarantees part of a loan made by a private lender. That is why lender participation matters so much for construction loans.
One-Time Close and Two-Time Close Options
VA Circular 26-18-7 explains how lenders can structure construction/permanent loans. It describes two main types.
A one-time close loan (sometimes called single close) closes the construction financing and the permanent mortgage at the same time, before construction starts. When the home is finished, the loan converts to its permanent terms.
A two-time close loan has an initial closing before construction and a second closing at the end, when permanent financing replaces the construction loan.
In both cases, the loan funds can cover the cost to build and the cost of the land or the balance owed on the land. The undisbursed balance is held in an escrow or draw account and paid to the builder as work is completed. The circular states that the lender must get the borrower's written approval before each draw is paid to the builder.
What the VA Expects From the Builder and the Property
VA construction loans come with property and builder requirements that a buyer of an existing home may never see.
1. The home must meet VA Minimum Property Requirements before the loan guaranty is issued.
2. The appraisal can be based on plans and specifications for proposed construction.
3. A final inspection or certificate of occupancy is required when construction is complete.
4. VA materials describe builder warranty requirements for new construction, such as a one-year VA builder's warranty or an accepted insured protection plan.
5. Lenders commonly require the builder to be licensed and insured, and many have their own builder approval process.
This is where your builder choice matters. A builder who already understands draw schedules, inspections, and lender documentation can keep a VA construction loan moving.
Building on Land You Already Own
If you already own a lot, the land may be part of the transaction. The VA circular notes that proceeds can cover the balance owed on the land. Some lenders may also count equity in land you own outright. Ask your lender how they treat existing land before you design the home.
Before you commit to a plan, make sure the lot works. In Hampton Roads that often means checking flood zones, septic and well feasibility on rural parcels, wetlands, Chesapeake Bay Preservation Act buffers near water, and any HOA rules. These questions affect both the design and the appraisal.
Why Timing Matters for Service Members
Military moves add a timeline that civilian buyers do not always face. A custom build takes longer than buying an existing home, because design, permits, site work, and construction all have to happen in order. If you are on orders, talk with your lender and builder early about realistic timelines and what happens if your situation changes.
Some service members choose to build on land they plan to keep long term, even if they will not move in right away. Occupancy rules for VA loans are set by the VA and your lender, so get clear answers in writing before you make that decision.
How to Prepare
1. Request your Certificate of Eligibility through VA.gov or your lender.
2. Find a lender that actually offers VA construction loans, and ask whether they do one-time close, two-time close, or both.
3. Ask the lender about builder approval requirements before you sign a building contract.
4. Have your lot evaluated for flood zone, septic, wetlands, and access before you finalize a plan.
5. Review the draw schedule with your builder and lender so everyone agrees on how and when payments are made.
Custom Homes of Virginia has more than 20 years of experience building across Hampton Roads and working with lenders on draw schedules and inspections. If you are considering a VA loan for a custom build, contact our team and we can talk through the process alongside your lender. If you still need land, Fit Realty can help you search for lots that fit your plans.
