VA Loan to Buy Land and Property
There are many ways to use your VA loan benefit and one of those is to purchase land to build a home on. The VA loan benefit cannot be used to purchase land specifically for the purpose of owning land. But if you are planning to build a home on the plot of land you are purchasing, a VA loan is a great way to finance your new construction.
VA Loan Benefit to Purchase Land
There are several ways you can go about financing a new build with a VA loan:
Purchase the land with a VA loan, and then start construction.
With a VA construction loan, you can roll the cost of construction together with the purchase of the land into one mortgage. There are many benefits to this option because a VA loan typically requires no down payment for qualifying US military servicemembers and veterans.
Not all VA-approved lenders offer construction loans. VeteransLoans.com does not provide construction loans, but we do offer VA loan financing for new builds that are 90% complete.
Purchase the land with alternative funding and use a VA loan to construct your home.
You can purchase the land with cash reserves or a personal loan and then use a VA construction loan to build your home.
Buy the land and construct the home with alternative funding, and then refinance the built home with a VA loan.
A VA-backed cash-out refinance loan may be able to offer you better terms than your original loan. You may also be able to get a cash payout to help pay off other debts. This option will require that your home meets VA loan requirements. You may also be required to pay a VA funding fee.
VA Loan Land Purchase Requirement
In order to purchase land with a VA loan, you will need to meet all of the basic VA loan eligibility requirements. You will then need to ensure the land you purchased meets all of the VA requirements for accessibility, safety, and habitability.
- The land must have pedestrian and vehicle access from a public or private street.
- The home must be accessible without having to pass through adjoining properties. If any easements are necessary, they must be legally transferable to a new owner.
- The property must be graded for drainage from the home and to prevent pond formation.
- Flood insurance is required if the land is in a FEMA Special Flood Hazard Area (SFHA).
- A water test is required for private water wells to ensure the land has a supply of safe drinkable water.
- The property also must have a safe method of sewage disposal.
- A VA appraisal will check for any potential topographical hazardous conditions, such as avalanches, mudslides, sinkholes, unstable soil, or falling rocks that could be dangerous, and any other environmental problems like slush pits, underground storage tanks, and chemical contamination.
- If the land is in a FEMA Special Flood Hazard Area (SFHA), flood insurance will be required.
- Any land near an airport will be evaluated for potential noise and safety concerns.
VA Loan Construction Financing Options
New construction is financed a little differently than a traditional purchase. With a new build, there are two different loan terms, the terms of the construction financing and the terms of the final mortgage.
- One-time close loan: With this financing option, the construction loan and permanent financing are rolled into one. Before construction, permanent loan financing will be set up and when construction is complete, the final terms will kick in.
- Two-time close loan: With this option, there are two closings instead of one, and a second loan replaces the first with permanent financing.
VA Loan Farm Land Purchase
A VA loan can be used to purchase a farm. The VA requires the farmland to have a residential dwelling that will be the permanent residence of the buyer. This means you cannot purchase farmland that does not have a residence on it, even if you intend to build a home on it.
The VA does not limit the number of acres that can be purchased with a VA loan. The value of the property cannot include livestock, crops, or farm equipment and supplies. The VA will want the lender to evaluate the borrower’s ability and experience as a farm operator evaluated similarly to how VA-approved lenders are required to evaluate a borrower’s income and work history.
Contact a Loan Specialist
Have more questions about how to purchase property with a VA loan? We can help you! VeteransLoans.com is a VA-approved lender that offers conventional, FHA, and VA loan products. Our loan specialists can answer any questions you have and work with you to get you pre-qualified. Call 1 (888) 232-1428 to speak with a loan specialist today!