VA construction loan requirements must be met before a lender will approve your build. Knowing what they are before you apply puts you in a stronger position and prevents the delays that come from being unprepared..
Here is the complete checklist.
Service Requirements
Before anything else, you must have sufficient military service to qualify for a VA loan.
For active duty servicemembers, the requirement is 90 continuous days of active service.
For veterans who served during wartime, the requirement is 90 days of active service. For peacetime service, the requirement is 181 days.
For National Guard and Reserve members, the requirement is six years of service, or 90 days of active duty service under Title 10 or Title 32 orders with at least 30 of those days being consecutive.
Surviving spouses of veterans who died in service or from a service-connected disability may also be eligible.
Certificate of Eligibility
You must obtain a Certificate of Eligibility before your lender can process your VA construction loan application. The COE confirms your service history and shows your available entitlement.
You can obtain your COE through your lender, through VA.gov, or by mailing VA Form 26-1880 to your regional VA loan center. Getting it early in the process prevents delays.
Credit Score
The VA does not set a minimum credit score for VA loans. However, most lenders who offer VA construction loans require a minimum score of 620 to 640. Some lenders require higher scores for construction loans than for standard VA purchase loans because of the additional complexity and risk involved.
Check your credit score before you apply. If it is below 620 address any issues before starting the process.
Income and Debt-to-Income Ratio
You must demonstrate stable, reliable income sufficient to repay the loan. Lenders will review your employment history, pay stubs, tax returns, and other income documentation.
The VA guideline for debt-to-income ratio is 41 percent, meaning your total monthly debt payments including your projected mortgage payment should not exceed 41 percent of your gross monthly income. Some lenders will approve above 41 percent with compensating factors such as significant cash reserves or strong residual income.
Builder Requirements
Your builder must meet VA requirements to participate in a VA construction loan.
The builder must be licensed and insured in the state where construction will occur. The builder must register with the VA and provide documentation of their license, insurance, and financial stability. The builder must also be willing to sign the VA builder’s certification and work within the draw schedule and inspection process.
Not every builder is familiar with VA requirements. Confirm your builder’s willingness and eligibility early.
Land Requirements
If you do not already own the land, you will need to either purchase it separately or incorporate the land purchase into your VA construction loan depending on your lender’s program.
The land must be suitable for residential construction and must pass VA appraisal standards. It cannot be in a flood zone without appropriate flood insurance and must have access to utilities or a plan for utility installation.
Construction Plans and Specifications
Before the appraisal can be ordered your lender will require a complete set of construction documents. These include your blueprints and floor plans, a complete specifications list detailing materials and finishes, a plot plan, and a signed builder contract with a fixed price.
Incomplete documentation is one of the most common causes of appraisal delays. Have your builder prepare a thorough package before you submit.
VA Appraisal
Your lender will order a VA appraisal based on your proposed construction plans. The appraiser will estimate the completed value of the home and issue a Notice of Value. Your loan amount cannot exceed the Notice of Value.
The Bottom Line
Meeting these requirements is not complicated but it does require preparation. Veterans who gather their documentation, verify their builder, and confirm their eligibility before applying move through the process significantly faster than those who learn requirements as they go.
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