California Veterans facing sky-high home prices and bidding wars have another option: building your own home. A VA construction loan lets you finance land, construction, and your permanent mortgage, all without the usual down payment most conventional construction loans require.
If you've been searching for a home in California's tight market, building might give you a path forward when buying isn't working.
Why Building Can Make Sense Right Now
California's housing competition remains fierce, especially for move-in ready homes under $1 million. In areas with limited inventory, particularly suburban and rural communities, construction loans offer a way to skip the bidding wars and create exactly what your family needs.
Building also means you can choose everything from the floor plan to energy-efficient features. California's strict building codes ensure new construction is among the most energy-efficient and earthquake-safe in the nation.
How VA Construction Loans Work
VA construction loans work differently than regular home purchases. Instead of getting all your loan money at closing, funds are released in stages as construction progresses. This protects everyone involved by ensuring work is completed before payments go out.
You'll need to work with a licensed, insured builder. Your lender will require your written approval before releasing each payment to the builder, giving you control over the process.
Your Two Main Options
One-Time Close (Construction-to-Permanent): You close once before breaking ground. During construction, you only pay interest on funds already disbursed. When your home is finished, the loan converts to a regular mortgage automatically. One closing, one set of fees, and one qualification process.
Two-Time Close: You take out a short-term construction loan first, then refinance into a permanent VA mortgage when building wraps up. This means two closings and two sets of fees, but can offer flexibility if your situation changes during construction.
Most Veterans prefer one-time close loans for the simplicity and cost savings.
Who Qualifies
You'll need to meet standard VA loan eligibility, which means having a Certificate of Eligibility (COE) that proves your military service qualifies you for VA benefits.
Beyond military qualifications, lenders look at your finances to make sure you meet their lending criteria. You'll also need sufficient residual income (money left over after paying your mortgage and monthly debts) to cover basic living expenses.
Working with Builders in California
California builders must navigate Title 24 Building Standards Code, some of the nation's strictest building regulations. These codes cover everything from energy efficiency to seismic safety, and they update every three years. Your builder should know these requirements.
Start by asking your lender for their list of approved builders. Interview at least three, check their references, and look at their completed projects. The best builders communicate clearly, stay on schedule, and have experience with VA loans.
The Step-by-Step Process
First, get pre-approved with a VA lender who offers construction loans. Not all do, as this type of lending requires specialized knowledge. Bring architectural plans, construction costs, and timeline estimates to your lender meeting.
Your lender orders a VA appraisal based on your proposed plans, not current land value. This appraisal determines how much the VA will pay once construction is complete.
After approval, your lender sets up an escrow account holding your construction funds. As your builder completes major phases, they will request payment. Your lender must get your written approval before releasing each payment.
Inspections will be scheduled at key milestones to ensure the work meets both VA standards and local building codes. In California, you'll coordinate with your local building department for required inspections throughout construction.
California-Specific Challenges
Building in California costs more than almost anywhere else. Construction labor runs high, materials are expensive, and land prices can be astronomical. Budget realistically and include a contingency fund for unexpected costs.
Permitting takes time here. California Environmental Quality Act (CEQA) reviews apply to certain projects, and local jurisdictions often add their own requirements beyond state minimums. What takes three months elsewhere might take six in California, so plan accordingly.
California also requires wood-destroying insect inspections statewide for VA appraisals. Coastal areas face additional coastal zone requirements. Building in fire-prone areas? Expect stricter standards for defensible space and fire-resistant materials, plus higher insurance costs.
Costs and Fees You'll Pay
Unless you qualify for an exemption due to service-connected disability, you'll pay a VA funding fee at closing. This one-time fee helps keep the program running without requiring down payments or mortgage insurance. You can finance this fee into your loan amount rather than paying cash upfront.
Veterans receiving VA disability compensation don't pay this fee at all.
Lenders may charge up to two percent of the loan amount as a construction supervision fee if they're actively managing the build and releasing payments. You'll also pay standard closing costs like title insurance and appraisal fees.
Here's a money-saving tip: If you've owned your land for more than a year before closing, its appraised value can count as equity to reduce your funding fee.
Common Challenges (and How to Handle Them)
Finding a lender: This is your biggest hurdle. Some VA lenders don't touch construction loans. Start with local credit unions and banks serving your community. Some online lenders specialize in VA construction nationwide.
Timeline uncertainty: Weather delays, material shortages, permitting holdups, and labor scheduling issues are all normal. Build extra time into your expectations and keep some financial cushion for carrying costs.
Managing changes: Want to upgrade those countertops mid-construction? Any changes to your original plans need an appraiser review to ensure they don't hurt your home's value. Major changes might require a new appraisal, paid from your contingency fund or out of pocket.
Is Building Right for You?
VA construction loans offer advantages like no down payment, no private mortgage insurance, competitive rates, and a custom home built exactly how you want it. For Veterans struggling to find suitable homes in California's market, building can be an excellent alternative.
But it takes more time, energy, and hands-on involvement than buying an existing home. You'll make hundreds of decisions about finishes, fixtures, and features. You'll need to live somewhere else during construction, which is a challenge in California's expensive rental market. And you'll need financial reserves for the unexpected.
Building makes sense if you've found land in an area with limited inventory, or have specific needs that existing homes don't meet. California's strict energy codes mean new construction often costs less to heat and cool than older homes.
Getting Started
Ready to explore building? Start by getting your Certificate of Eligibility from the VA. Then research lenders experienced with both VA loans and California construction. Interview multiple lenders and compare their rates, fees, and construction lending experience.
Talk to builders in your target area. Look at their work, check references, and ask about their familiarity with VA requirements. Contact your city or county building department early to learn what's required.
With the right team and realistic expectations, a VA construction loan can help you build exactly the home your family needs in California's challenging market.
If you’re still not sure whether you want to build your own home or buy an existing home, read more about VA loans
Frequently Asked Questions
Can I buy land now and build later with a VA loan?
Generally, no. VA doesn’t guarantee loans for land purchased by itself without plans to build a primary residence in connection with the VA loan. If you want to buy land first, you'll need separate financing, then use a VA construction loan later to build on land you already own.
Do I still need a VA-registered builder?
The VA eliminated the builder ID requirement in 2025, but your builder must still be properly licensed and insured. Most lenders maintain lists of approved builders they've successfully worked with before.
How long does the process take in California?
VA loan approval for construction typically takes 45-60 days or more, depending on underwriting, appraisals, and plans review, per VA guidelines. The full timeline from planning to move-in often spans 12-18 months or longer due to California's local permitting, environmental reviews, and construction phases, which is longer than the national average.
What if construction costs more than estimated?
You'll need to cover overruns with cash. Lenders won't increase your loan mid-construction. This is why including a 10-15% contingency reserve is important.
Can I be my own general contractor?
You must hire a licensed, insured, and lender-approved builder who will manage the construction process to comply with VA standards and inspections. If you are a licensed, insured, and lender approved contractor, then you may be able to build your own home.
