For many homebuyers, the idea of building a home from the ground up feels like a luxury reserved for a different time or a higher tax bracket. But that perception is changing. According to the National Association of Home Builders, custom home construction is quietly gaining momentum, even as other parts of the housing market struggle. In the third quarter of 2025 alone, there were roughly 51,000 custom home starts, a 6% increase from the same time the year before. Over the most recent four quarters, custom housing starts climbed to about 187,000 homes, marking a five percent year-over-year increase.
What’s especially interesting is that custom home building tends to behave differently than other segments of the housing market. It’s less sensitive to interest rate swings and more closely tied to household wealth and buyer priorities. With fewer speculative homes being built and more buyers seeking long-term value, custom homes are capturing a larger share of the new construction market. Today, they account for just over 19% of all single-family housing starts.
For military families, that trend makes sense. “Servicemembers and Veterans often think long-term about where they want to put down roots after years of moving,” says Kevin Crooks, Construction Loan Manager of AAFMAA Mortgage Services LLC (AMS). “Building a home that truly fits your lifestyle, your family, and your future can feel like a natural next step.”
Related: Where to Find Affordable Land and How to Get a Construction Loan
What Makes Financing a Custom Home Different
Most custom homes are financed with a construction loan, which releases money in stages as the home is built. “These funds are typically paid out after inspections confirm that certain milestones have been completed, such as laying the foundation or finishing the framing. Once construction is complete, the loan either converts into a permanent mortgage or is paid off with a new one,” Crooks says.
Some borrowers use a construction-to-permanent loan, which combines construction financing and the long-term mortgage into a single loan with a single closing. Others use a two-step process, with a short-term construction loan followed by a permanent mortgage once the home is finished. Both approaches can be effective, but they require more coordination, paperwork, and planning than a traditional home purchase.
Related: Military Construction Loans from AMS
Why Custom Builds Can Make Sense for Military Families
Despite the extra steps, many military buyers find that building a home is well worth the effort. Custom homes offer a level of flexibility that’s hard to find in existing housing stock. Whether that means designing a layout that works for a growing family, incorporating accessibility features, or prioritizing energy efficiency, building lets you plan for the future rather than adapting to someone else’s past choices.
From a financial standpoint, VA Home Loan benefits can make custom building more attainable than many people expect. The absence of private mortgage insurance alone can result in significant monthly savings. Competitive interest rates and flexible underwriting guidelines can also help borrowers who are rebuilding their credit or navigating a transition period after service.
That said, there are real challenges to be aware of. VA construction loans aren’t offered everywhere, and the documentation requirements are more involved. Construction timelines can be affected by weather, supply chains, and labor availability; it’s essential to build in financial and emotional flexibility to accommodate these realities.
“Some military buyers choose an alternative path by using a conventional construction loan to build the home and then refinancing* into a VA Home Loan once construction is complete,” explains Crooks. “Others opt to purchase a newly built home from a builder using a standard VA purchase loan, avoiding the construction phase altogether. The right choice depends on your goals, timeline and comfort level with the building process.”
Related: Members Switch to AMS to Pay Off Their Construction Loan
We’re Here to Help
Thinking about buying, ready to start home shopping in earnest, or considering a refinance? An AMS Military Mortgage Advisor, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.
Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!
*Refinancing your mortgage may result in higher finance charges over the life of the loan.