Veterans Affairs (VA) Construction Loans in California: Building Your Dream Home with a VA Loan

Are you a veteran, active-duty service member, or qualifying surviving spouse in California dreaming of building your own home? A VA construction loan could be the perfect path to turning that vision into a reality. While the process can be more complex than a standard VA home purchase, the benefits often outweigh the effort—especially in a high-demand housing market like California.

Note: At Merchants Home Lending, we don’t offer initial construction financing, but we specialize in helping borrowers refinance into a permanent VA loan once your newly built California home is complete.

What Is a VA Construction Loan?

A VA construction loan is a short-term loan backed by the U.S. Department of Veterans Affairs designed to finance the cost of building a new home. Unlike a traditional mortgage that pays out in one lump sum, this loan releases funds gradually as construction milestones are completed.

In California, where housing costs are steep, VA construction loans offer significant benefits:

• $0 down payment required in many cases
• No private mortgage insurance (PMI)
• No VA funding fee for disabled veterans or qualified surviving spouses

This loan option is especially valuable for those who prefer custom-built homes in locations such as Riverside, Sacramento, San Diego, or inland communities where land is more affordable.

Who Can Apply for a VA Construction Loan in California?

To qualify for a VA construction loan in California, you must meet standard VA eligibility criteria, which typically includes:

• At least 90 consecutive days of active-duty service during wartime
• Or 181 days of service during peacetime
• Or 6 years of service in the National Guard or Reserves

Additionally, to apply for a VA construction loan, you must:

• Work with a VA-approved builder licensed in California
• Submit a complete set of construction plans
• Provide detailed documentation about the building materials
• Obtain a VA-approved appraisal for the planned home

How to Apply for a VA New Construction Loan in California

Getting approved for a VA construction loan in California requires several important steps. Here’s how the process works:

1. Get Your Certificate of Eligibility (COE)

Your COE verifies that you meet the service requirements for a VA loan. You can request this certificate online through the VA eBenefits portal or ask your lender to obtain it for you.

2. Get Preapproved by a VA Lender

Not all lenders in California offer VA construction loans, so it’s essential to ask upfront if they handle this type of financing. Preapproval gives you a clear idea of how much home you can afford to build—and shows builders that you're serious.

3. Choose a VA-Registered Builder in California

The builder must be registered with the VA and licensed to operate in the state of California. You can find registered builders through the Veterans Information Portal or ask your lender for a list.

4. Order a Property Appraisal

A VA-certified appraiser will review the builder’s plans to ensure they meet VA construction standards. This step is critical for loan approval.

5. Close on the Construction Loan

After all documents are submitted and approved, you’ll close on the construction loan. The timeline in California typically ranges from 45 to 60 days. Funds are released as your builder completes each stage of the home.

6. Complete Final VA Inspection

Once construction wraps up, a final VA inspection ensures the home meets required standards. At this point, you may either:

• Transition to a VA construction-to-permanent loan, or
• Refinance into a permanent VA loan—which is where Merchants Home Lending can help.

What to Know About VA Construction Loans in California

Building a home in California comes with some unique factors:

• Owner-builders aren’t allowed. You must use a licensed California contractor approved by the VA.
• Builder’s closing costs may be included in your construction agreement.
• Loan timelines may extend due to local regulations, permits, and zoning laws in areas like Los Angeles County or the Bay Area.

Why Work With Merchants Home Lending?

While Merchants Home Lending doesn’t offer the construction phase loan, we specialize in helping California veterans convert their finished construction projects into affordable long-term VA mortgages.

We’ll help you:

• Refinance from your construction loan
• Lock in competitive VA mortgage rates
• Ensure all final VA requirements are met
• Simplify your transition into permanent homeownership

Whether you’re building in San Bernardino, Orange County, or anywhere in between, our VA loan specialists are ready to help you secure the home you’ve envisioned.

Final Thoughts: Is a VA Construction Loan Right for You?

If you're eligible for VA loan benefits and want a custom home tailored to your lifestyle, a VA construction loan could be a powerful tool. While it requires more effort than buying an existing home, the financial perks—no down payment, no PMI, and potential funding fee exemptions—make it worth exploring.

Need help once your home is built? Contact Merchants Home Lending to transition your construction loan into a permanent VA mortgage with ease.

Ready to move forward?
Call (800) 246-9518 or apply online today.
Let our California VA loan experts help you make your dream home a reality.

FAQs About VA Construction Loans in California

1. How does a VA construction loan work?

Funds are released in stages as construction progresses. You don’t start making payments until the home is built and the loan transitions to permanent financing.

2. Can I build any type of home with a VA construction loan in California?

VA loans are generally limited to site-built, single-family homes. Most lenders won’t approve mobile, modular, or container homes.

3. What interest rate will I get?

Rates are set by the lender and depend on your credit score, debt-to-income ratio, and financial profile—not by the VA directly.

4. When do I start paying the loan back?

Loan repayment typically begins once construction is finished, and you’ve transitioned into your long-term VA mortgage.

5. Can I use a VA loan to buy land and build later?

Some VA construction loans may allow land purchase, but typically the construction must begin soon after the loan is issued. Speak with your lender about California-specific policies.