VA Loans for Land: How They Work
A VA loan can be a great way to buy a home, but can it be used to purchase land for a potential home? Here's what you need to know about VA loans for land.
Veterans and active duty military members may wonder if they can purchase land using their VA home loan benefit.
The good news is that yes, it’s absolutely possible, but it must be done in conjunction with building a home on that property. Lenders will not approve you for a VA loan for the sole purpose of purchasing land alone.
Let’s dive into the details on buying land with a VA loan.
Purchasing Land with a VA Loan
There are essentially three different ways to purchase land using a VA loan:
- Buy the land and build the home at the same time using a VA construction loan. This allows you to combine both the costs of the property and the building of the home into a single mortgage. Finding a lender that offers VA construction loans can be difficult as they come with a higher level of risk.
- Use alternative financing to buy the land, then use your VA loan benefit to build the home once you’re ready. This option offers some additional flexibility if you’ve found a property you want to purchase but aren’t quite prepared to make it your primary residence.
- Use a short-term construction loan to both purchase the land and build the home, then refinance the mortgage with a VA loan. A VA Cash-Out refinance allows buyers to borrow up to 100 percent of a home’s appraised value, which means it can be used to restore many of the upfront costs required for the construction of the home.
VA Land Loan Requirements
In order to ensure the accessibility, safety and habitability of the property, the land must meet minimum VA guidelines in order to be eligible for a VA loan. These include:
- Street access from a public or private street
- Proper drainage and drinkable water
- No environmental issues such as chemical contamination
- Having flood insurance if located in flood hazard area
- Not be located near a high noise zone (railroad, airport, highway, etc.)
- Not be vulnerable to landslides, earthquakes, or other geological hazards
How Many Acres Can I Buy With a VA Loan?
While the VA does not limit the number of acres, a VA-guaranteed property may have, individual lenders may set their own restrictions.
Final Thoughts
Buying land using a VA loan is possible, but it’s not without its limitations. Most lenders do not offer VA construction loans and if you find one that does, they typically require a down payment to offset the increased risk.
Speak with an approved VA lender today for more information on how you might be able to use your VA loan benefit to help build your dream home.