Are VA Construction Loans Really Harder for Builders? What Builder's & Veterans Need to Know

Are VA Construction Loans Really Harder for Builders?Austin McKnight

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This is a question I hear frequently—both from clients and builders: “Is a VA construction loan harder for the builder than a conventional construction loan?”

My answer: not necessarily. Yes, VA construction loans come with more documentation requirements than your standard conventional construction loan, but that doesn’t mean they’re harder—just different.

Let’s break it down by looking at what VA requires before the appraisal and after construction is complete, and how that compares to conventional loans.

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🔍 Pre-Appraisal VA Construction Requirements

1. Construction Contract The VA requires a turnkey, fixed-price contract. "Turnkey" means everything must be included to make the home livable—utilities, septic, well, electrical, etc. This is to protect the veteran from cost overruns or surprise expenses.

2. Blueprints / Plans A full set of plans is required, including wall section details. This level of detail ensures the VA appraiser and underwriter can properly evaluate the home’s construction.

3. Description of Materials (VA Form 26-1852) VA 26-1852 - Description of Materials This six-page form can feel intimidating at first, but in reality, it’s just a structured version of what any competent builder should already have priced out. As a builder myself, I’d be concerned if a builder couldn’t complete this. It would raise red flags about how they priced the job in the first place.

4. Builder’s Certification (HUD-92541) HUD-92541 - Builder’s Certification This is a straightforward certification where the builder agrees to meet specific minimum property standards and adhere to applicable building, electrical, and energy codes.

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🏗 Post-Construction & Final Draw Requirements

1. Inspection Options The builder must provide one of the following:

• A Permanent Certificate of Occupancy (CO), or

• A 10-Year Insured Warranty covering the home and foundation, or

• A series of inspections: footing, framing, and final inspection by the local authority.

Additionally, the appraiser will complete a final inspection using Form 1004D before the final draw can be released.

2. Termite Protection In most states, VA requires termite treatment/prevention. The builder must complete:

• HUD-NPMA-99-A: Subterranean Termite Builder’s Guarantee

• HUD-NPMA-99-B: Completed by the pest control company, if professional treatment is used

Approved treatments include soil chemicals, EPA-registered bait systems, pressure-treated wood, or naturally termite-resistant lumber.

3. Septic System Approval (if applicable) The builder is responsible for submitting proof of local authority approval for the septic system. Most are already doing this; it just needs to be documented for the lender.

4. Water Quality Test / Well Approval (if applicable) The water must be potable and meet health department or EPA standards. Builders must provide:

• A third-party water test for contaminants (Coliforms, E. coli, Nitrates, Lead, etc.)

• Documentation showing local or state approval of the well

Testing must be performed and transported by a disinterested third party, such as the health department or a certified lab.

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💬 Final Thoughts

After 18 years working in government-backed construction lending—and running a custom home building company for the last 10—I can confidently say: if a builder is doing their job right, none of these VA requirements should be difficult. Yes, they require more documentation up front and at the end, compared to a conventional construction loan, which might just need a final inspection from the appraiser. But that’s a small price to pay for the benefits VA loans provide veterans—like 0% down and no PMI.

If a builder complains that VA loans are “too difficult,” it may just be that they’re not used to the paperwork—not that the requirements are unreasonable. Most reputable builders are already securing septic approvals, filing building permits, and keeping detailed material specs—they just aren’t used to providing it all to the lender. But with good planning and clear communication, VA construction loans are not only manageable—they're a fantastic option for eligible buyers.