VA loans

VA Loans: New Construction Loans vs. Existing Construction

March 4, 2015

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VA Loans: New Construction Loans vs. Existing Construction

VA loans for new construction homes have different requirements than VA loans for existing construction purchases. In a troubled housing market, some lenders don’t see as much demand for new construction loans, but this trend is steadily improving.

The rules for new construction loans normally don’t affect the buyer interested in purchasing existing construction property. For example, new construction properties have specific rules about builder’s warranties. Existing construction homes are sold as-is–the buyer must ensure the home they purchase meets their expectations.

Knowing the difference between what the VA considers “new” versus what the VA considers existing construction is quite helpful. Just because a building is brand new and less than a year old does not mean it counts as a new construction property. To a first time homebuyer that property may look, smell and feel like brand new construction, but there’s one very important qualifier that makes all the difference in the eyes of the Department of Veterans Affairs.

Once a building has been purchased and occupied, it is no longer classified as “new construction” by the VA. A one-owner property is classified as existing construction regardless of how long the original ownership period lasted. If a buyer has a condominium built, for example, and suddenly needs to sell the home or have the loan assumed, even in the first year of ownership, once the VA borrower comes along and makes an offer, they are making an offer on existing construction.

Even when the building seems brand new, the buyer should not neglect an independent home inspection by a qualified inspector. The trained eye of a professional may catch defects not addressed or repaired during the original building project. All existing construction loans should be treated the same regardless of how new or old the property may be.

8 Comments
  1. Sharon Cales

    Im looking for the forms required to get builder VA approved

    • Joe Wallace

      Information on VA builder requirements is located at http://www.benefits.va.gov/homeloans/build_info.asp

  2. Dennis Gowey

    I am looking for information about a VA remodel loan. I recently paid off my only VA loan. I want to do a major remodel on a property that is paid off. Do you have any information or could you guide me in the right direction to advance my research.

    • Joe Wallace

      Though technically the VA does not offer a guaranty for a “remodel loan” it does offer refinancing loans that feature cash back to the borrower for any purpose suitable to the lender including home improvements. In your case it the refinancing option isn't really applicable since you've already paid off the loan, but I would call the Department of Veterans Affairs at 1-800 827 1000 to ask for some advice in your specific circumstances.

  3. PATTY

    MR WALLACE, BOTH MY HUSBAND AND I ARE VETERANS AND ARE PLANNING ON BUILDING A HOME ON OUR FARM IN RURAL MISSOURI. IF WE PLAN ON DOING MOST OF THE WORK OURSELVES DO WE STILL NEED TO HAVE A VA BUILDER IN ORDER TO GET A VA GUARANTEED CONSTRUCTION LOAN? THANKS

    • Joe Wallace

      Discuss your specific needs with the VA directly at 1-800 827-1000 as it may have unique circumstances which may not apply to all borrowers.

  4. Edward Saldivar

    Please explain the requirements for a New Construction Loan. What is needed to obtain a new construction loan and what must the builder and architect consider when designing and building a home using a V.A. loan. Regards, Edward Saldivar (956) 459-1505

    • Joe Wallace

      Please call the VA at 1-800 827-1000 for assistance with this question.

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