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Construction Loans for Veterans: Do They Exist?


Building a dream home is a goal for many Veterans after they retire from military service. The process can be confusing and overwhelming if you don’t know where to start and how to finance the build. For military families, there are a few options to obtain construction financing.

How to Obtain a Construction Loan for Veterans

There are three common pathways to obtaining construction financing for a new home:

1. Builder Financing

You can obtain financing directly from the homebuilding company. While this is certainly a convenient option, builder financing can be tricky and costly, especially if you run into problems with a builder during the construction phase.

If your home is part of a large subdivision, it is possible the cost will be comparable to purchasing a home already built. In this case, builder financing may be a good option for you. However, if you’re looking to purchase land and build a custom home outside of a traditional builder subdivision, builder financing may not be your best option. There are often hidden fees that can end up surprising borrowers once they get the final bill from the builder.

Take the time to do your research and choose a reputable builder before opting for builder financing.

2. Lender Financing

A construction loan can be used to cover the cost of the land, contractor labor, building materials, permits, and more. Some loans may require you to own the land, and then finance only all of the construction costs. Since construction loans are short-term and depend on the completion of the project, borrowers will need to provide the lender with a construction timeline, detailed plans, and a realistic budget. Once approved, the lender will pay out portions of the loan as stages of the build are completed.

The downside to lender financing is that few lenders actually offer construction loans. As this financing option is not very accessible, borrowers typically opt for builder lending. Fortunately, AAFMAA Mortgage Services LLC does offer the Construction Advantage Loan, a proprietary construction loan for Veterans and military servicemembers, which finances the cost of construction if you own the land.

3. Pay Cash

The borrower may also pay for the build completely in cash, though this option is not always feasible.

Important Considerations for Construction Financing

As with any major financial decision, it’s critical to understand the risks associated with each option. Here are some of the most important factors to keep in mind as you seek to select the best option for your project:

Choose the Right Lender and Builder

When choosing among builders and financing options, make sure all risks are understood up-front. Often, a builder will negotiate upgrades for countertops, appliances, and other design elements, but may neglect to discuss financing options. The cost of building a home can add up quickly if you don’t discuss fees, hidden costs, and upgrades beforehand. Conducting extensive research, weighing all of your options, and discussing costs prior to breaking ground is critical to ensure you get the best possible outcome.

Make a Down Payment

In some cases, the biggest risk when it comes to building a home is making a down payment prior to the construction of the property. If the homebuilder is experiencing financial challenges, they may misuse the down payment you provide to cover costs they’ve incurred, rather than putting that money toward the funding of your new home construction. It’s important to obtain itemized receipts throughout the build to ensure all of your investment can be accounted for. It’s also a good idea to consult a fiduciary to help keep track of the financing of the build as the project progresses.

Learn More About Construction Loans for Veterans from AAFMAA Mortgage Services LLC

Financing is one of the biggest obstacles military families face when it comes to building a new home—but it doesn’t have to be. Let AAFMAA Mortgage Services LLC (AMS) and our Military Mortgage Advisors help you get the construction loan you need to finance your dream home.

The Construction Advantage Loan from AMS provides military servicemembers and Veterans with the financing to go from a patch of land to the place family memories are made. We offer flexible terms and competitive rates—including up to seven draws to pay your builder as construction is completed. Once your home is finished, we’ll help you get a permanent mortgage from a wide range of options, including VA, FHA, USDA, and conventional loan products.

Contact the AMS team to learn more about our construction loans for Veterans. Call 844-246-7930 to get current rates and additional details from our experts.