VA Construction Loans in Illinois

Building a new home in Illinois with a VA loan

Illinois offers two very different building experiences. In the Chicago area, new detached homes usually go up on infill lots in older suburbs, on teardown sites, or in newer communities on the outer edge of the metro. Downstate, from Peoria to Springfield to the Metro East, land is easier to find and acreage near a small town is a realistic goal. A VA one-time close construction loan works in both settings, covering the lot 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 Illinois Veterans from start to finish. The program terms are the same: a 12-month construction period, no payments during the build, and a 15- or 30-year fixed rate at conversion.

Where Veterans build in Illinois

Popular cities to build in Illinois include Chicago, Naperville, Springfield, Rockford and Peoria. A closer look at the main regions:

• Chicago and the inner suburbs: buildable lots are scarce and expensive. Most new single-family homes here are teardown-and-rebuild projects. Remember that attached homes and two-flats that share walls with neighbors aren't eligible, though a detached 2–4 unit building where you live in one unit can be.
• Collar counties (Naperville, Plainfield, Oswego, Yorkville, Huntley, Crystal Lake): newer subdivisions and some larger lots on the fringe, especially in Kendall, Will, Kane and McHenry counties.
• Lake County and the North Shore: close to Naval Station Great Lakes. Towns like Gurnee, Grayslake, Antioch and Zion are within a reasonable commute.
• Metro East (O'Fallon, Shiloh, Mascoutah, Belleville, Lebanon): the home base for many Scott Air Force Base families, with steady new construction and rural land a short drive away.
• The Quad Cities, Rockford, Peoria and Springfield: moderate land prices, close-in acreage, and the Rock Island Arsenal on the Mississippi.
• Southern Illinois (Carbondale, Marion, the Shawnee Hills): wooded and rolling land with lower prices and more rural lots.

Land and site considerations in Illinois

• Frost depth. Northern Illinois winters push footings deeper than in the south of the state. Basements are common in the north and are a cost to weigh against a crawlspace or slab.
• Clay soils and drainage. Heavy clay and a high water table are common on the prairie. Good grading, drain tile and a sump are standard in many areas. Wet or poorly drained lots can limit where the home and septic system go.
• Septic and wells. Rural lots usually need a private well and a septic system approved through the county health department, based on soil testing.
• Floodplains. Land near the Illinois, Mississippi, Fox, Des Plaines and Rock rivers can fall in a mapped floodplain. Flood insurance is required in a special flood hazard area, and elevating the home adds cost.
• Tornadoes and storms. Severe spring and summer storms are part of life in Illinois. A basement or safe room is worth considering in your plans.
• Farmland parcels. Many rural building sites are split from farm ground. The VA loan can't finance a working farm, so the lot should be a residential parcel with recorded access.

Already own your lot? The already-owned land page explains how land equity and any payoff fit into the loan. For teardowns, demolition belongs in the builder's contract, and new construction can't start before closing.

Builder licensing in Illinois

Illinois licenses certain trades at the state level, including roofing contractors, which are licensed by the Illinois Department of Financial and Professional Regulation (IDFPR). General contractor licensing is handled locally. The City of Chicago, for example, requires a general contractor license from its Department of Buildings for permitted work, and many suburbs and counties have their own registration rules. Your builder should meet the requirements of the town or county where you build.

For a VA construction loan, the builder must be approved by the lender before closing and must work under a fixed-price contract. My team's VA construction loans don't allow owner-builders or DIY work. See our builder information page for the approval process.

Eligible homes

You can finance a new site-built home, modular home, barndominium, new manufactured home (multi-width, or single-width only from select manufacturers) or 2–4 unit home where you live in one unit, as long as it's your primary residence. Attached homes, co-ops, container homes, working farms and lots where construction has already started are not eligible. The minimum property requirements checklist explains the details.

Illinois property tax relief for Veterans with disabilities

Property taxes are a big part of the monthly payment in much of Illinois, so the state's Standard Homestead Exemption for Veterans with Disabilities is worth filing for as soon as you move in. It is based on your service-connected disability rating as certified by the VA:

• 30% to under 50%: a $2,500 reduction in the home's equalized assessed value
• 50% to under 70%: a $5,000 reduction
• 70% or more: a full exemption on the home (state law caps the assessed value it covers, which mainly affects very high-value homes)

The exemption must be renewed every year through your county assessor's office. Once your new home is complete and occupied, ask your county assessor about filing, and see the county summary of the Disabled Veterans Standard Exemption as an example. Our property tax exemption by state page has more.

Budgeting for an Illinois build

The loan amount covers the lot or payoff, the builder's fixed-price contract, and the interest reserve and construction management fee, which are built into the loan and paid by the builder, so you make no payments during construction. VA construction loans start at a 620 minimum credit score, and larger loan amounts may need a higher score. Qualifying looks at residual income first, and a higher debt-to-income ratio is often fine when residual income is strong. Because Illinois property taxes are part of your payment, your estimate should use a realistic tax figure for the finished home. Plan on 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 closing costs guide.

Illinois VA construction loan FAQs