VA Construction Loans in Delaware

Building a new home in Delaware with a VA construction loan

Delaware is small, but it offers more room to build than many people expect. Northern New Castle County is largely built out, while Kent County and Sussex County still have farmland being split into lots, rural parcels along back roads, and new communities spreading inland from the beaches. For a Veteran who wants a new home instead of a resale, a VA one-time close loan covers the land purchase or payoff, construction and the permanent mortgage at one closing, with $0 down on loans up to $1 million.

Shirley's team handles VA construction loans for Delaware Veterans, from pre-approval to the final draw. The structure is the same nationwide: a 12-month construction period, no payments while the home is built, and a 15- or 30-year fixed rate after conversion.

Where Veterans are building in Delaware

Popular cities to build in Delaware include Wilmington, Dover, Newark, Middletown and Milford. Here is how each area tends to work for new construction:

• Dover and central Kent County: the natural choice for families at Dover Air Force Base. Towns like Camden, Wyoming, Magnolia, Felton and Smyrna have a mix of subdivision lots and rural land, often at lower prices than the north.
• Middletown, Townsend and southern New Castle County: the main growth area below the Chesapeake and Delaware Canal, with an easy commute toward Wilmington.
• Wilmington and Newark: mostly established neighborhoods. A new detached home here is usually an infill lot or a teardown and rebuild rather than raw land.
• Milford, Georgetown and inland Sussex County: plenty of rural parcels, and a quieter alternative to the coast.
• Coastal Sussex (Lewes, Rehoboth, Millsboro area): popular, but lot prices are high and flood-zone rules apply close to the water and bays.

Land and site considerations

Delaware is flat compared with its neighbors, which keeps site work simpler, but the low ground creates its own issues:

• High water tables and septic. Much of Kent and Sussex sits on sandy coastal-plain soil with groundwater close to the surface. Rural lots usually need on-site septic, and a site evaluation determines what type of system you can use. Some lots need an elevated or alternative system, which costs more. Get the evaluation before you finalize plans.
• Private wells. Outside town water service, a private well is typical. The VA appraisal will want to see that water is safe and meets local requirements.
• Flood zones. Land near the Delaware Bay, the Inland Bays and tidal rivers may be in a special flood hazard area, where flood insurance is required and the home may need to be elevated.
• Coastal storms. Nor'easters and the occasional tropical storm bring wind and flooding to the coast. Plans for coastal Sussex lots need to account for wind and, near the water, elevation.
• Former farmland. Many rural lots were carved from fields. Confirm the parcel is a legally recorded lot with road access and that the subdivision and drainage plans have county approval.

Permits and zoning come from the county (New Castle, Kent or Sussex) or from the town if you're inside town limits. If you already own land in Delaware, see how the VA construction loan on already-owned land works.

Builders in Delaware

Every contractor doing business in Delaware must register with and obtain a business license from the Delaware Division of Revenue, as a resident or non-resident contractor. Beyond that, counties and towns set their own permitting and inspection requirements, and licensed trades such as electricians and plumbers carry their own credentials, so check with your county about anything else that applies to your project.

The lender also has to approve the builder before closing, and the work has to be under a fixed-price contract. Ask for proof of the Delaware business license, insurance and recent homes they have completed. My team's VA construction loans don't allow owner-builders or DIY work. Our builder information page covers the approval package.

Eligible home types

You can finance a new site-built home, a modular home, a barndominium, a new manufactured home (multi-width, or single-width only from select manufacturers) or a 2–4 unit home where you live in one unit. The home must be your primary residence. Attached homes, co-ops, container homes, working farms and lots where construction has already started are not eligible. Many new Delaware communities are townhome or duplex projects, so confirm the home will be fully detached. The minimum property requirements checklist has the rest.

Delaware school property tax credit for disabled Veterans

Delaware offers the Disabled Veterans School Property Tax Credit, which covers 100% of the non-vocational school district property tax on your primary residence. To qualify, you must receive 100% VA disability compensation for a service-connected, permanent and total disability (through a 100% rating or individual unemployability) and have been a Delaware legal domiciliary for the past three years. It can't be combined with the Senior School Property Tax Credit. Applications for the upcoming tax year are due April 30, and the tax bill must be paid in full each year to keep qualifying. Details are on the Delaware Department of Finance site, and our property tax exemption by state page has a broader overview.

Putting the loan together

The loan amount includes the lot or payoff, the builder's contract, and the interest reserve and construction management fee, which are built into the loan and paid by the builder, so you have no payments during construction. Unused contingency is applied to principal when the loan converts. VA construction loans start at a 620 minimum credit score, and larger loan amounts may need a higher score. Veterans receiving VA disability compensation are exempt from the VA funding fee. Expect about 2–3 months to close, then a 12-month construction period. Learn more on the VA construction-to-permanent loan page and in our explanation of the interest reserve.

Delaware VA construction loan FAQs