Do Realtors Have A Role in VA Construction Loans?

 

VA Construction Loans: What Realtors Need to Know

Quick answer

Veterans can build with a VA-guaranteed construction/permanent loan and a savvy Realtor that knows their trade has a crucial role to play.  I'll break it down for you!

---

Your role as the Realtor (at a glance)

• Deal architect: Help the Veteran choose between one-time close vs two-time close based on builder capabilities and lender options. Benefits

• Land strategist: Verify zoning, utilities, HOA/ACC rules, flood/septic/well constraints, and any deed restrictions that can affect VA Minimum Property Requirements (MPRs). Benefits

• Builder vetting: Confirm the builder is properly licensed/bonded per local law (VA no longer requires a VA builder ID for guaranty-program loans, but lenders must still ensure builder eligibility). Benefits

• Contract quality control: Guide a fixed-price contract with clear allowances, change-order process, draw schedule, and warranty language that meets VA rules. Benefits+1

• Timeline traffic-cop: Keep exhibits (plans/specs/permits) aligned with the appraisal “from plans & specs”, and keep everyone on pace for final VA inspection and guaranty issuance. Benefits

---

Core program facts Realtors should know

• Two ways to structure:

  • One-time close (OTC): Single closing; construction funds held in a controlled draw escrow; Veteran must approve each disbursement; loan modifies to permanent at completion. Benefits

  • Two-time close: Interim construction financing, then VA permanent refi after completion and compliance. Benefits

• Appraisal & NOV: Ordered from plans & specs; VA issues a Notice of Value (NOV); a post-construction inspection by the VA appraiser confirms the home matches exhibits/MPRs before VA issues the guaranty. Benefits

• Warranties & inspections: VA relies on local code inspections plus requires either a 1-year builder warranty (VA Form 26-1859) or an eligible 10-year insured plan (depending on local inspection regime). Benefits

• Acquisition-cost math (OTC): Max base loan is the lesser of NOV or acquisition cost (contract + eligible soft costs; land treatment depends on timing/balance), plus Funding Fee if financed. Benefits

• Builder ID change (2025): No VA builder ID is needed for most VA-guaranteed new/proposed construction; lenders still screen for sanctions and local compliance. Benefits

---

Step-by-step: From concept to keys (with Realtor tasks)

1. Early discovery & budget

   • Confirm COE/eligibility with lender; set budget guardrails.

   • Realtor: align neighborhood, lot characteristics, and HOA rules with VA MPRs (setbacks, utilities, access, flood). Benefits+1

2. Land & builder selection

   • Choose a lot (or validate the client’s lot).

   • Vet builder licensing/bonding and experience with VA draws/warranties (no VA builder ID required post-3/31/2025). Benefits

3. Plans, specs, and fixed-price contract

   • Assemble complete exhibits: architectural plans, specs, site plan, permits plan, allowances, contingency, and draw schedule.

   • Include warranty terms compliant with Chapter 10. Benefits

4. Pre-approval & underwriting

   • Lender underwrites per Chapter 7 construction guidance and standard credit rules.

   • Realtor: keep all exhibits synchronized; changes later can delay the NOV or force re-review. Benefits

5. Appraisal “from plans & specs” → NOV

   • Lender orders appraisal; VA issues the NOV with any completion conditions.

   • Realtor: confirm any NOV conditions (e.g., final grading/landscaping, driveway surface) are in the contract scope. Benefits

6. Close (OTC) & escrow setup

   • One closing; Funding Fee handled at close; construction proceeds move to escrow.

   • Veteran must approve each draw; lender validates progress per draw schedule. Benefits

7. Construction & inspections

   • Local code inspections proceed; address any punch-list/NOV conditions.

   • Warranty documentation prepared (VA 26-1859 or 10-year insured plan). Benefits

8. Post-construction VA inspection

   • VA appraiser verifies the home matches plans/specs and MPRs.

   • Realtor: ensure all completion items (e.g., final CO, septic/well sign-offs) are ready for the visit. Benefits

9. Modify to permanent & move-in

   • Loan converts to permanent terms; VA issues the Loan Guaranty Certificate. Keys, photos, celebration. Benefits

---

Documents Realtors should help corral

• Final plans & specs, site plan, surveys, utility confirmations

• Fixed-price builder contract with allowances, draw schedule, change-order rules

• Permit plan and any HOA/ACC approvals

• Warranty commitment (VA 26-1859 or 10-year insured plan)

• Proof of builder licensing/bonding/insurance; subs list if required by lender/appraiser Benefits

---

Timeline (typical ranges)

• Pre-approval & exhibits ready: 1–3 weeks

• Appraisal/NOV on plans & specs: 1–3 weeks (local turn-times vary)

• Build cycle: 6–10+ months depending on market/scope

• Final VA inspection to modification: ~1–2 weeks after CO/completion items
  (Your lender’s local turn-times and builder cadence ultimately govern these.) Benefits

---

Common pitfalls (and how you prevent them)

• Vague scopes/allowances → change-order chaos

  • Fix with a tight, fixed-price contract and clear overage rules. Benefits

• NOV conditions missed until the end

  • Pre-map NOV conditions into punch-list and schedule them earlier. Benefits

• Draw frictions (missing Veteran approvals or milestone proofs)

  • Set a 10-minute, same-day sign-off habit for the buyer; align builder draw triggers with lender requirements. Benefits

• Warranty mismatch

  • Confirm the 1-year VA 26-1859 or 10-year insured plan up front based on local inspection regime. Benefits

• Out-of-bounds acquisition-cost math

  • Keep base loan at lesser of NOV or acquisition cost; plan land treatment correctly based on ownership timing/balance. Benefits

---

Talking points you can use with Veterans

• “VA allows you to build—not just buy—and we’ll structure it as a one-time close so you close once and convert at completion.” Benefits

• “Your appraisal is done from plans & specs, and VA will do a final inspection before issuing the guaranty.” Benefits

• “VA recently removed the builder ID requirement; we still ensure your builder is licensed and solid.” Benefits

• “We’ll keep your draws smooth—you approve each disbursement so funds match progress.” Benefits

---

Primary sources (for your files)

• VA Pamphlet 26-7 (Handbook) – Chapter 7: Construction/permanent mechanics, acquisition-cost rules, draw approvals. Updated June 5, 2024. Benefits+1

• VA Pamphlet 26-7 – Chapter 10: Appraisal from plans & specs, warranty/inspection requirements, post-construction inspection. Benefits

• VA Circular 26-18-7 (Apr 6, 2018): Construction/permanent guidance and process flow. Benefits

• VA Circular 26-25-1 (Mar 31, 2025): Eliminates builder ID for new/proposed construction in the guaranty program; updates builder complaint process. Benefits+1

---

How I partner with you

• 15-minute game-plan for your buyer (budget, structure, timeline)

• Builder contract checklist aligned to VA Chapters 7 & 10

• Draw schedule template and communication cadence

• Weekly milestone updates you can forward to your client

If you’ve got a Veteran considering a build in TX, FL, AL, CO, or TN, I’ll pre-flight their lot, builder, and contract this week and line up a clean path from concept to keys.