Buying Land With a VA Loan: A Complete Guide

You can use a VA loan to buy land as long as you plan to build a house on it. For military borrowers, loans backed by the U.S. Department of Veterans Affairs (VA) are an attractive option, since they don’t require a down payment and can offer better terms than a land loan from a bank or credit union.

Buying land to build a home on is an exciting prospect for many homebuyers, especially veterans and service members who have VA home loan benefits. VA loans offer huge advantages like zero down payment and no mortgage insurance that can make buying land and custom-building a home much more affordable.

But can you really use a VA loan to buy vacant land? What are the rules and requirements? In this complete guide, we’ll cover everything you need to know about using a VA loan to purchase land and build a dream home from the ground up.

Can You Use a VA Loan to Buy Just Land?

This is one of the most common questions about VA loans and land Unfortunately, the answer is no – you cannot use a VA-backed loan to purchase vacant land only However, you can use your VA home loan benefit to buy land and build a home on it simultaneously.

The key is that the land cannot be an standalone purchase The VA requires you to build a home on the land within a reasonable timeframe, generally within a year. They do not finance the purchase of land only

So if you find an ideal plot of land you want to buy first and build on later, a VA loan won’t work. You’d need to finance the land purchase separately, then construct the home using your VA benefits. More on how that process works below.

How to Use a VA Loan to Buy Land and Build

Since the VA requires you to build a home soon after buying the land, most veterans and service members will need to utilize what’s called a VA construction loan.

A VA construction loan combines the purchase of land and construction of a new home into a single mortgage loan. Here are the key steps involved:

Get pre-approved for a VA construction loan and submit plans for building your home.
Use the VA construction loan to buy the land first.
Then the construction phase begins – the lender will issue periodic disbursements (called “draws”) to your builder as they make progress toward completing your home.
Construction must be finished within one year, at which point your VA construction loan converts into a permanent VA mortgage and you begin making payments.

One thing to keep in mind is that while you don’t make payments during construction, your loan term still begins as soon as building starts. So if construction takes 6 months, you’d only have a 29.5 year loan term going forward. This can mean slightly higher monthly mortgage payments than a comparable purchase loan.

VA Construction Loan Requirements

As with all VA loans, there are requirements the property must meet for a VA construction loan. Some key rules include:

The home can be no more than 4 units. You must live in 1 unit as your primary residence.
The home must be on a permanent foundation. No mobile homes.
The property must meet VA minimum property requirements around safety, access, utilities, environmental standards, etc.
The land cannot be in a flood zone, noise zone, or have other hazards like mudslides, sinkholes, etc.
Your builder must be VA-approved.

The VA has pretty strict standards when it comes to the land and property itself, so be sure to go over all requirements closely with your lender.

Pros and Cons of VA Construction Loans

Pros

Zero downpayment with full entitlement
No monthly payments during construction
No mortgage insurance
More flexible credit guidelines than conventional loans

Cons

Slightly higher long term payments
More rules to follow on land/property
Need to use VA-approved builder
Limited lender options

While VA construction loans offer nice perks, you will have fewer lender options since not all VA lenders provide these specialized loans. The limited competition can also mean higher rates in some cases.

Alternatives for Buying Land With VA Benefits

If you don’t want to deal with the rules of a VA construction loan or have trouble finding a lender, there are a couple alternatives that let you tap your VA benefits to build a home:

Finance Land Separately, Then VA Construction Loan

Buy the land with a land loan, personal loan, or cash
Use VA construction loan just for building home
You’ll have two separate loans – one for land and one for home

Finance Land and Construction Upfront, Then VA Cash-Out Refinance

Use short-term construction loan for land purchase and build
Once home is built, refinance into a VA loan
Cash out equity for down payment payback or to pay other debts

No matter what option you choose, buying land and building a custom home with your hard-earned VA benefits can help you design the perfect home in the perfect location. Just be sure to understand the VA guidelines and pick the optimal loan strategy for your situation.

Frequency of Entities:

VA loan: 20
land: 17
home: 14
build: 8
construction: 7
property: 5
requirements: 4
purchase: 4
benefits: 3
loan term: 2
mortgage insurance: 2
monthly payments: 2
primary residence: 2
VA-approved: 2
zero down payment: 2
permanent foundation: 1
flood zone: 1
noise zone: 1
mudslides: 1
sinkholes: 1
personal loan: 1
cash-out refinance: 1
short-term construction loan: 1

How to use a VA loan to buy land

If you’re planning to build a home yourself, a VA loan can make it easier to finance the purchase of the land it’ll sit on. You can also use a VA loan to purchase an already-existing home that’s sitting on a plot of land.

There are two VA loan options that will cover your land purchase: VA construction loans and VA farm loans. We’ll walk through both in more detail below.

A VA construction loan lets you roll the costs of purchasing land and building a home into one mortgage, with no down payment and fewer requirements than conventional construction loans. VA construction loans are considered “construction-to-permanent loans” because the construction part of the loan is converted to a permanent mortgage once the home is built.

Here’s how it works:

You get preapproved for a loan and submit plans for construction.
You use a VA construction loan to buy the land and begin construction.
As construction progresses, the VA loan periodically issues payouts (known as “draws”) until the home is completed.
You need to complete the construction within one year, at which point you’ll begin making payments on your permanent loan.

Your monthly payments won’t begin until construction is complete, but the loan term starts when construction begins, not when it’s complete. This means you could end up with slightly larger monthly mortgage payments. For example, say construction takes a year to complete — going forward, you’ll have the payments associated with a 29-year loan, rather than a 30-year loan.

A VA farm loan allows qualified buyers to become farm owners. But this type of loan comes with some limitations:

→ The property must already have a house on it, so you can’t use the loan to simply buy acreage. → You need to use the land for residential purposes, which excludes buying a farm business.

Requirements for VA home construction loans

Besides meeting individual eligibility requirements for a VA loan, you’ll need to make sure the land you want and your construction plan meet VA criteria. The requirements having to do with accessibility, safety and habitability are called Minimum Property Requirements (MPRs). Some of the most important rules include:

Number of units: Up to four family units, unless you’re buying with another veteran. In that case, you can purchase or build up to six family units.
Occupancy: You must live in the property as your primary residence.
Street access: Properties must have pedestrian and vehicle access from a public or private street.
Easements: You must have access to your future home without passing onto adjoining properties. and if any easements are necessary, they’ll need to be legally transferable to a new owner.
Drainage, soil and other hazards: The property needs to be graded to allow drainage from the home and prevent pond formation. Your VA home appraisal will also need to take note of dangerous topographic conditions, like those that might lead to avalanches, mudslides, sinkholes, unstable soil or falling rocks.
Flood insurance: If the land is located in a FEMA Special Flood Hazard Area (SFHA), you’ll need to buy flood insurance in order for your loan to go through.
Water and sewer: Your property must be able to provide a continuous supply of safe and drinkable water, as well as a safe way to dispose of sewage (like a septic tank).
Environmental problems: Your appraiser will need to report potential environmental problems, such as slush pits, underground storage tanks, or chemical contamination.
Proximity to airports: Land near airports must be evaluated for potential noise and safety concerns.

Can You Use the VA Loan to Buy Land?

FAQ

Can VA loans be used for land?

Buying land with a VA loan is possible, but it must be done simultaneously with constructing a new home. You can’t use a VA loan to purchase land by itself – even if you intend to build a home later.

What property Cannot be financed with a VA loan?

You can’t purchase or build a vacation home or a purely investment property with a VA loan. New construction is possible, but veterans can’t simply purchase a plot of land with the intent to build a home some day. You also can’t use this as a business loan. Again, the focus is on primary residences.

Can you turn a VA home into an investment property?

But if that’s on your radar, VA borrowers can use their benefit to purchase a home, live in it for a time, and then rent it out as an investment property. While many choose to reside in their purchased homes for extended periods, others see the opportunity for additional income and expanded property ownership.

Can you use VA benefits to purchase an investment property?

You can use a VA loan to purchase a single-unit home, a duplex, a triplex, or a quadplex as long as one of those units is your primary residence. So like in the example we just mentioned, you can use a VA loan to purchase an investment property.

Can you buy a house with a VA loan?

“You can do a new-construction VA loan, and that would [allow the borrower to] purchase the land and build the home. However, you cannot purchase ‘land only’ with a VA loan.” Borrowers are required to begin construction immediately after securing the land to qualify for a VA construction loan.

Can veterans buy land with a VA construction loan?

Veterans can indeed use a VA construction loan to purchase land and build a custom home.However, there are some important details to consider: 1.**Simultaneous Purchase**: Veterans can’t buy land with

Can a VA loan be used for a farm residence?

VA loans can be a great tool for acquiring a farm residence. You can use your VA home loan benefit to purchase, build or repair a farm residence on land you own or land you plan to buy. Requirements to use a VA loan for farm land include: The VA home loans discussed above can be used to buy and build your next home.

Will a VA loan cover my land purchase?

There are two VA loan options that will cover your land purchase: VA construction loans and VA farm loans. We’ll walk through both in more detail below. A VA construction loan lets you roll the costs of purchasing land and building a home into one mortgage, with no down payment and fewer requirements than conventional construction loans.