GETTING YOUR BUILD
APPROVED
Before you break ground, here's what needs to line up.
FINDING THE RIGHT BUILDER
Not every builder is set up to work with VA construction loans. You need a licensed, insured builder who understands VA requirements and is willing to follow the draw and inspection process.
As of 2025, builders no longer need a VA Builder ID to work on VA construction projects. However, your lender will still verify that your builder is properly licensed and insured, and that they have experience with construction-to-permanent loans.
The goal: fewer delays, cleaner draws, and a smoother path from plans → appraisal → build → convert.
BUILDER REQUIREMENTS
- ✓Licensed and insured in your state
- ✓Experience with VA construction loans (preferred)
- ✓Willing to provide fixed-price or GMP contract
- ✓Can complete VA Form 26-1852 accurately
- ✓Agrees to draw schedule and inspection process
- ✓Provides one-year builder warranty (VA Form 26-1859)
- ✓Maintains builder's risk insurance during construction
- ✓Provides lien releases at each draw
PLANS, SPECS & CONTRACT
These are the two most common reasons VA OTC files get delayed: incomplete plans/specs and a contract that doesn’t match the scope. Use the tabs to review what matters most.
Plans & Specifications
Your builder must provide complete, detailed construction plans. These aren’t just sketches — they’re professional architectural or engineering drawings that show every aspect of the home: floor plan, elevations, foundation details, framing, electrical, plumbing, and HVAC.
Along with the plans, your builder submits VA Form 26-1852 (Description of Materials). This form details every material and specification: foundation type, lumber grades, roofing materials, window brands, plumbing fixtures, flooring, cabinets, countertops, paint — everything.
Contract Requirements
Your construction contract must be a fixed-price or guaranteed maximum price (GMP) contract. Cost-plus contracts (where you pay actual costs plus a percentage) are generally not allowed for VA construction loans.
The contract should include: total contract price, detailed scope of work, construction timeline with start and completion dates, draw schedule tied to milestones, warranty information, and provisions for change orders.
BUDGET & COST BREAKDOWN
Your builder provides a line-item cost breakdown showing how the total contract price is allocated across different construction phases: site work, foundation, framing, rough-ins (plumbing, electrical, HVAC), insulation, drywall, finishes, and more.
This breakdown is used to create the draw schedule. Funds are released as each phase is completed and inspected. Typical breakdowns have 4–6 major draws, though some lenders use more granular schedules.
Your total loan amount includes: land cost (if not already owned), construction costs, VA funding fee (can be financed), and any other closing costs you choose to finance.
LENDER REVIEW PROCESS
Before ordering the appraisal, your lender reviews every component of your file to ensure the project meets VA guidelines, budget alignment, and borrower qualification standards.
Builder & Documentation Review
The lender verifies builder license and insurance, reviews construction plans, Form 26-1852, contract, and cost breakdown to ensure everything is complete and aligned.
VA & Budget Compliance
They confirm the plans meet VA Minimum Property Requirements (MPR), the contract price matches the scope of work, and the overall budget makes sense for the project.
Borrower Qualification Check
Your income, credit, and residual income are reviewed to ensure they support the proposed loan amount before moving forward to appraisal ordering.
WHAT CAN GO WRONG & HOW TO PREVENT IT
Builder Not Properly Licensed or Insured
Prevent It
Verify licenses and insurance before signing. Ask for certificates and confirm with your state licensing board.
Incomplete or Vague Plans & Specs
Prevent It
Make sure every detail is specified. Generic lines like “builder’s choice” create appraisal issues.
Contract Price Doesn’t Align with Plans
Prevent It
Match the contract scope to the plans and Form 26-1852. Discrepancies delay lender review.
Builder Refuses the Draw Schedule
Prevent It
Choose another builder. The draw + inspection process is non-negotiable for VA construction loans.
Timeline Is Too Aggressive
Prevent It
Add buffer time for weather, materials, and inspections. Rushed timelines create costly problems.
RESERVES & CONTINGENCY PLANNING
Even with a fixed-price contract, you should have cash reserves. Change orders happen. Unexpected site conditions arise. Permit fees vary. You might want upgrades.
Lenders typically want to see 2–6 months of reserves (mortgage payment, taxes, insurance) after closing. If you're carrying another mortgage or rent during construction, plan for that too.
Construction rarely goes exactly as planned. Preparing financially gives you flexibility and reduces stress during the build.