VA single-close construction loan
- Phil Wells
- 2 days ago
- 3 min read
Updated: 2 days ago
Fellow Veterans, If you've been dreaming of building your perfect home but dreaded the hassle of multiple loans and closings, there's exciting news from the Department of Veterans Affairs (VA). A major update has just rolled out, making it easier than ever to finance land, construction, and your permanent mortgage—all in one seamless loan. As a real estate professional passionate about helping Veterans, I'm breaking down everything you need to know about this game-changer. Let's dive in!
What Is the VA Single-Close Construction Loan?
The VA single-close construction loan, also known as a one-time close or construction-to-permanent loan, allows eligible borrowers to bundle the costs of buying land (if needed), building a new primary residence, and securing the long-term mortgage into a single loan with just one closing. This eliminates the traditional two-time close process, where you'd first get a short-term construction loan and then refinance into a separate VA mortgage—saving you time, money, and stress.
Previously, while VA policy allowed for construction financing, the complexity often limited lender participation, pushing many Veterans toward the more cumbersome two-step approach. Now, with this formalized program, the VA is encouraging wider adoption to address housing shortages and empower more custom builds.
When Did This Update Take Effect?
The program officially launched on August 6, 2025, as announced by the VA Loan Guaranty Service. This timing aligns with broader 2025 enhancements to VA loans, including the elimination of the builder identification number requirement back in March, which further streamlines the process.
Key Benefits: Why This Is a Big Deal
This isn't just a minor tweak—it's a major win for Veterans facing competitive housing markets. Here's what stands out:
Zero Down Payment and No PMI: Like standard VA loans, you can finance 100% with no private mortgage insurance, keeping costs low.
One Closing, Fewer Fees: Say goodbye to duplicate appraisals, underwriting, title fees, and settlement costs. Everything happens upfront, with a single set of loan fees.
Locked-In Rates: Secure your interest rate at closing, protecting against market fluctuations during construction.
High Loan Limits: In high-cost areas, loans can exceed $1 million, depending on your qualifications and lender approval.
Funding Fee Exemptions: If you have a service-connected disability, you might skip the VA funding fee entirely (typically 2.3% for first-time use).
Plus, funds are disbursed in stages (draws) based on construction progress, with VA-approved inspections ensuring quality.
Who Is Eligible?
Eligibility mirrors standard VA home loans:
Service Requirements: Active-duty service members, Veterans with honorable discharge, certain Reservists/National Guard members, and eligible surviving spouses.
Credit and Income: Lenders typically look for a credit score of 620+, stable income (e.g., two years of employment), and a manageable debt-to-income ratio. You'll need reserves for any overages.
Property Use: The home must be your primary residence, completed within a reasonable time (usually 12 months), and meet VA Minimum Property Requirements (MPRs) and local building codes.
Not eligible for investment properties, second homes, or land-only purchases without immediate construction. Modular or manufactured homes may qualify if they adhere to VA standards.
Requirements for Borrowers and Builders
Borrowers: Provide a Certificate of Eligibility (COE), detailed architectural plans, a line-item budget, a signed contract with the builder, and an "as-completed" appraisal.
Builders: Must be state/licensed, fully insured, and experienced in similar projects. As of March 2025, no VA-issued builder ID is needed, but compliance with local regs is non-negotiable.
The Step-by-Step Process
1. Get Your COE: Apply via the VA website or through a lender.
2. Choose Partners: Select a VA-approved lender experienced in construction loans (not all offer them yet) and a qualified builder.
3. Submit Docs: Provide plans, budget, contract, and financials for underwriting.
4. Close the Loan: One closing disburses initial funds; the rest come in draws after inspections.
5. Build and Convert: During construction, pay interest only on drawn funds. Once complete and certified, it auto-converts to a standard VA mortgage.
Timelines? Expect 6-12 months for building, with Veteran approval required before each draw.
Limitations and Considerations
While revolutionary, rollout is gradual—not every lender participates yet, so shop around with VA specialists. Land inclusion depends on lender policies, and delays could mean extra interest during the build phase. Always consult the VA Lender's Handbook for the nitty-gritty.
Final Thoughts: Is This Right for You?
In a market where inventory is tight, this update opens doors for Veterans to create custom homes tailored to their needs—without the financial headaches of yesteryear. If you're ready to build, reach out to me and I'll introduce you to a VA-approved lender today to check your eligibility and get started.
As always, this isn't advice,
for personalized advice contact me direct