The Ultimate Guide to VA Construction Loan in California (2025)

When you're dreaming of building your own home in California, and you’ve served or are serving in the U.S. military, a VA construction loan can make that dream come true. At Merchants Home Lending, we’re proud to help veterans, active-duty service members, and eligible surviving spouses navigate the complexities of financing new construction. In this comprehensive guide, we’ll walk you through everything you need to know about VA construction loans, especially in California.

What is a VA Construction Loan?

A VA construction loan is a type of home loan backed by the U.S. Department of Veterans Affairs (VA) that enables eligible veterans to finance both the construction and permanent mortgage of a new home. Unlike traditional construction loans, VA construction loans often come with:

• Zero down payment
• Lower interest rates
• No private mortgage insurance (PMI) requirement

What makes the VA construction loan especially attractive in California is that it helps veterans compete in one of the most competitive housing markets in the country.

How Does a VA Construction Loan Work in California?

Understanding how a VA construction loan in California works is key to ensuring a smooth home-building experience. Here’s a high-level breakdown of the process:

1. Get Prequalified – Work with VA-approved lenders like Merchants Home Lending to determine your eligibility and borrowing power.
2. Find VA-Approved Builders – Your home must be built by a licensed, insured, and VA-registered builder.
3. Submit Plans and Specs – Your builder provides blueprints and cost estimates that must be reviewed and approved by the VA.
4. Loan Closing and Construction Phase – The loan closes before construction begins, and funds are released in phases called "draws."
5. Conversion to Permanent Loan – Once construction is complete, the loan may convert to a traditional VA mortgage with a fixed rate.

This one-time-close process ensures simplicity and cost savings.

VA Construction Loan California Requirements

To qualify for a VA construction loan in California, certain criteria must be met both by the borrower and the property.

Eligibility Requirements

• Must have a valid Certificate of Eligibility (COE)
• Minimum credit score of 620 (varies by lender)
• Stable income and satisfactory debt-to-income ratio
• Must intend to occupy the home as your primary residence

Property Requirements

• The home must be a single-family dwelling
• Must meet VA minimum property requirements (MPRs)
• Built by a VA-approved builder
• Must be completed within 12 months of the loan closing

Builder Requirements

• Must be licensed and insured
• Registered with the Department of Veterans Affairs
• Must provide a VA builder ID

At Merchants Home Lending, we help our clients connect with reputable, VA-approved builders across California.

VA Construction Loan California Calculator

Wondering what your monthly payments might look like with a VA construction loan in California? Use our user-friendly VA construction loan California calculator to get a clear breakdown of:

• Loan Amount
• Interest Rate
• Loan Term
• Estimated Monthly Payment

Our calculator also includes property tax and homeowner’s insurance estimates to give you a full financial picture.

VA Construction Loan California Lenders

Not every lender is equipped to offer VA construction loans, especially in California where zoning laws, environmental factors, and high land prices add complexity.

At Merchants Home Lending, we specialize in helping military borrowers take advantage of the full benefits of the VA construction loan program. As a VA-approved lender, we streamline the process with:

• Dedicated VA loan specialists
• In-house underwriting
• Fast approvals and competitive VA construction loan rates

But we go the extra mile by offering personalized service tailored to California’s unique real estate market.

VA Construction Loan Rates

VA construction loan rates can vary depending on the market, your credit profile, and the lender. Typically, VA loan interest rates are lower than conventional loans because of the VA guarantee.

Current VA Construction Loan Rates in California (as of June 2025)

Rates are subject to change. Contact Merchants Home Lending for today’s personalized rates.

How to Build a Home with a VA Loan

Building a home with a VA construction loan involves multiple steps, but with the right team, it's an incredibly rewarding process.

1. Get Preapproved – This ensures you know your budget before choosing land or a builder.
2. Choose Land – The cost of land can be included in the loan, as long as construction begins immediately.
3. Select a Builder – Must be VA-approved.
4. Submit Blueprints – Required for VA inspection and appraisal.
5. Begin Construction – Inspections occur at each phase.
6. Loan Converts to Permanent Mortgage – Once construction is complete and final inspection is approved.

Throughout the journey, our team at Merchants Home Lending will guide you every step of the way.

What is the VA Construction Loan Process?

The VA construction loan process involves several milestones. Here’s a detailed walkthrough:

Step 1: Preapproval

Get your finances reviewed and ensure your credit, income, and eligibility meet VA guidelines.

Step 2: Select Builder and Land

Find a VA-registered builder and a lot that’s zoned for residential construction.

Step 3: VA Appraisal and Underwriting

An appraisal is conducted based on the proposed construction plans. VA underwriters then assess the loan.

Step 4: Close Loan and Start Construction

The loan closes, and construction begins. Funds are released in stages, and inspections ensure work is done to spec.

Step 5: Final Inspection and Certificate of Occupancy

Once complete, the property must pass a final VA inspection and receive a Certificate of Occupancy.

Step 6: Loan Conversion

The loan converts into a fixed-rate VA mortgage. This seamless transition avoids a second closing.

VA Construction Loan California Eligibility

To be eligible for a VA construction loan in California, you must:

• Have served 90 consecutive days during wartime, 181 days during peacetime, or 6 years in the National Guard or Reserves
• Possess a valid COE
• Intend to live in the home as your primary residence
• Have a stable and reliable income

At Merchants Home Lending, we help you gather all documentation and guide you through every detail of eligibility and approval.

Why Choose Merchants Home Lending for Your VA Construction Loan?

We’re not just mortgage experts—we’re passionate about helping California’s veterans build the homes they’ve earned. Here’s what sets us apart:

• California Expertise – We understand local building codes, land acquisition, and regional cost variations.
• One-on-One Guidance – We offer dedicated VA specialists for personalized support.
• Fast Preapproval – Get clarity on your construction budget quickly.
• Wide Builder Network – We work with top VA-approved builders across the state.

Start Your Homebuilding Journey Today

Building your dream home in California doesn't have to be a fantasy. With a VA construction loan, your service to our country opens the door to homeownership in a way that’s both affordable and empowering. Let Merchants Home Lending guide you every step of the way.

If you’re ready to explore your eligibility or get a personalized quote, connect with us today. We’re here to serve those who’ve served.

FAQs:

1. How does the VA construction loan work in California?

It allows eligible veterans to finance both land and construction in one single loan, with zero down payment and lower rates.

2. What is the VA construction loan limit in California?

While there is no official limit, lenders may cap based on your income and the property’s appraised value. In high-cost areas like Los Angeles or San Francisco, loan amounts can exceed $1 million.

3. How to build a home with a VA loan?

Get preapproved, work with a VA-approved builder, and follow the loan process from blueprint to final inspection. Funds are released in stages during construction.

4. What is the VA construction loan process?

The process includes preapproval, builder selection, appraisal, underwriting, construction, inspections, and finally loan conversion to a permanent VA mortgage.