VA One Time Close Construction Loan: Build A Home Using VA Benefits

For many veterans, the idea of building a custom home isn’t just about comfort—it’s about creating a permanent foundation for their families. In today’s tight housing market, where resale inventory is low and competition can feel overwhelming, building your own home is one of the fastest ways to build equity and sidestep the bidding wars. Thanks to the VA loan program, this path is not just possible, it’s often more accessible than veterans realize.

A VA one time close construction loan allows eligible veterans to finance both the purchase of land and the construction of a brand-new home with little to no money down. Done right, it combines the hallmark benefit of VA loans—true 0% down homeownership—with the flexibility to design and build from the ground up. But because construction lending is more complex than a standard purchase, it’s essential to understand the process, the terminology, and the requirements before you begin.

This guide breaks down exactly how VA one-time close construction loans work and how LendFriend helps veterans take advantage of this program the right way.

What Is a VA Construction Loan?

At its core, a VA construction loan is a short-term loan that covers the cost of building a primary residence. Unlike a traditional purchase loan that finances a completed house, a construction loan funds the process in stages while the home is being built. Once construction is finished, that short-term loan transitions into a permanent VA mortgage.

The two most common structure for a VA construction loan are:

VA One-Time Close Construction Loan: This option bundles the construction financing and the permanent VA mortgage into a single closing that happens before construction begins. Once the home is complete, the loan automatically converts into a permanent VA mortgage, and the best part, there are NO monthly payments required during your build period. This eliminates the need for two separate closings and two sets of closing costs.

VA Two-Time Close Construction Loan: This less popular and more costly method requires two closings—one for the short-term construction financing and one for the permanent VA loan once the home is built. That means paying fees twice, going through underwriting twice, and locking into two separate interest rates. It’s a less efficient and more expensive option, which is why borrowers often prefer a one-time close but not all lenders are able to do a one-time close construction loan with VA benefits. 

It’s important to note that the VA itself does not directly fund construction loans. Instead, private lenders make the loans, and the VA guarantees a portion, reducing risk and making the terms far more favorable for veterans.

Why Build Instead of Buy?

In many markets, veterans are finding that existing home inventory is limited, outdated, or overpriced. By building new construction, you take control of the process:

• Immediate Equity: When you design and build, the finished home is often worth more than the combined cost of the land and construction. That difference is instant equity you would not gain buying a resale property at market value.

• Customization: You get to choose floor plans, finishes, energy efficiency features, and accessibility upgrades tailored to your needs.

• Newer = Fewer Repairs: Unlike an older resale home, a newly constructed home comes with warranties and meets modern building standards, lowering maintenance costs.

The VA loan program amplifies these benefits by eliminating the down payment and monthly private mortgage insurance (PMI) that conventional and FHA borrowers must contend with.

How VA One Time Close Construction Loans Work

The mechanics of a construction loan differ from a traditional mortgage. Instead of handing over the full loan amount at closing, the lender issues funds in stages—called draws—as construction progresses. The builder submits a request, an inspector confirms the stage of work is complete, and then the lender releases funds. This protects you, the lender, and ensures the home is built as agreed.

Here’s how the process typically unfolds:

Step 1: Eligibility Verification

Before anything else, you’ll need to verify that you meet VA loan eligibility requirements by obtaining your Certificate of Eligibility (COE). This document proves you qualify for the VA home loan benefit.

Step 2: Find a Lender

Not all VA-approved lenders offer construction financing., and even less offer a one-time close option for veterans. In fact, many shy away from the added complexity. LendFriend Mortgage offers a VA One-Time Close Construction Loans—giving you access to a faster, easier process with a single closing, one down payment, one interest rate, and one approval.

Step 3: Find a Builder

The VA requires that the home be built by a licensed, insured builder. While the VA no longer requires builders to maintain a VA Builder ID, choosing a builder with experience working with VA loans can help avoid delays. Your builder must submit complete plans, specifications, and a construction contract for lender approval before the loan closes.

Step 4: Appraisal Based on Plans

A VA appraisal is ordered not on the finished house (since it doesn’t exist yet) but on the construction plans and land. The appraiser issues a Notice of Value (NOV) that establishes the fair market value of the future home. Lenders will lend based on the lesser of the cost to acquire/build or the appraised value.

Step 5: Closing

With LendFriend’s one-time close program, you close on the construction and permanent mortgage together. No second closing, no duplicate fees, no wasted time. And the rate you close with isn’t locked for the entire term—in fact, with our one-time close program you’re able to lower your rate (for free) when you complete construction if rates have fallen since you started.

Step 6: Construction and Draw Schedule

During construction, the lender disburses funds hrough a draw schedule. Each stage—foundation, framing, plumbing/electrical, finishing—requires an inspection before funds are released. The lender can pay the contractor directly through these draws, ensuring that funds are used exactly as intended and keeping you from having to manage large out-of-pocket payments during the build.

Step 7: Final Inspection and Conversion

Once the home is complete, the VA requires a final inspection to confirm it meets Minimum Property Requirements (MPRs) and matches the approved plans. The loan then converts seamlessly into your permanent VA mortgage. And as I said in Step 5, with our one-time close program you're permitted to reduce your mortgage rate at this step if market rates have dropped, locking in the lowest VA rate available when you move into your new home.

Why One-Time Close Wins Every Time

Let’s be clear: a two-time close is a costly detour. Two appraisals, two sets of fees, two credit pulls, and the risk that rates rise between your first and second closing. It can easily add $5,000-$10,000 on your cost to build the home. Veterans deserve better. With LendFriend’s one-time close program, you lock in one rate upfront, with the option to modify down if the market improves before the project is complete. That means peace of mind, predictability, and real savings.

Key Benefits of LendFriend’s One-Time Close VA Construction Loans:

• VA loans available on 30-year fixed mortgages

• Loan amounts up to $4 million

• Eligible for primary residences and cash-out refinances

• Credit scores as low as 580 FICO

• Up to 100% Loan-to-Value (true zero down)

• No monthly payments required during the build period

This program is specifically built to eliminate the financial and logistical headaches of a two-time close. For veterans, that’s not just convenient—it’s transformative.

VA Construction Loans in Today’s Market

Housing inventory in the US is old and rundown in many parts of the country. If your alternative is buying an old house you need to renovate anyway, why not build a home that suits your tastes, is brand new, and builds instant equity? That's why more veterans are turning to new construction as the best solution. Surveys show that limited inventory and rising home prices are among the top barriers to homeownership. Building a home offers a direct way around those barriers.

More importantly, it positions you to build equity faster. In markets where home prices are rising, owning a newly built home often means your property appreciates before you even move in. That early equity is one of the most powerful financial advantages of building.

Why Veterans Have the Advantage

The VA loan benefit was designed to level the playing field. When it comes to construction, that advantage is even more significant:

• ZERO Down Payment: Conventional construction loans often require 10–20% down. With VA, you can finance the entire construction project.

• No PMI: While FHA and conventional borrowers pay mortgage insurance, VA loans eliminate that cost entirely.

• Flexible Credit Standards: VA guidelines allow for more leniency in credit history than conventional construction loans.

• Competitive Rates: Because the VA guarantees part of the loan, rates are often lower than other construction financing.

With LendFriend’s partnership with UWM, veterans can now combine those benefits with the simplicity of a true one-time close. That means no wasted money, no duplicate closings, and no compromise.