How to Buy 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.

As a veteran or active military service member, you know that VA loans offer excellent benefits for buying a home. But did you know that you may also be able to use your VA loan for purchasing land?

Buying land with a VA loan is possible, but there are specific requirements and limitations you need to understand. In this comprehensive guide, we’ll explain everything you need to know about using your VA home loan benefits to buy land.

Can You Buy Raw Land With a VA Loan?

The short answer is yes, you can buy vacant land with a VA-backed loan. However, there are strict rules around this:

You can’t use a VA loan just to purchase the land itself The loan must cover both the land purchase and construction of a home on that land
You must start building the home within a reasonable timeframe after buying the land, usually within a year.

So in essence, VA loans can only be used for buying land when you plan to build a home on that land right away. If you simply want to buy a plot of land to hold for future use, a VA loan won’t work.

VA Construction Loans

The main option for buying land to build on with a VA loan is called a VA construction loan. This is a specialized type of VA-backed mortgage designed for building a home.

VA construction loans work by rolling the costs of purchasing land and constructing a home into a single loan Here are some key features

No down payment – VA construction loans don’t require any down payment, just like standard VA loans.
Single closing – You only go through one closing process for both the land purchase and home construction.
One-time closing costs – Closing costs are paid once on the combined loan amount.
Payments deferred – You don’t make any mortgage payments until construction is complete.
Permanent financing – The construction loan converts to a permanent VA mortgage once building is done.

VA construction loans make it feasible for veterans and military members to buy land and build their dream home with 100% financing. However, these loans can be tricky to find since not all lenders offer them.

Requirements for Buying Land with a VA Loan

Using a VA construction loan to buy land and build comes with some specific VA requirements:

The home must be your primary residence when complete.
The property can have 1-4 housing units maximum. If buying with another veteran, up to 6 units allowed.
Land must have access to public or private roads.
Site must be graded for proper drainage.
Must meet VA minimum property standards for safety, land stability, water supply, sewage, etc.
Environmental hazards prohibited on site or nearby.
Flood insurance required if in high-risk flood zone.

In addition, you must use a VA-approved builder and the construction must be completed within 1 year. The VA will have mandatory inspections at certain points in the building process.

Pros and Cons of VA Construction Loans

Pros:

Requires no down payment
Combines land purchase & construction into one loan
Usually more flexible than conventional construction loans
No monthly mortgage payments during building

Cons:

Tough to find lenders who offer them
Strict VA property requirements
Higher monthly payment than a typical VA loan
Building must be done quickly, within 1 year

So while VA construction loans provide nice perks, they aren’t for everyone. Make sure you fully understand the requirements before pursuing this route.

Alternative Options for Buying Land with VA Benefits

If a VA construction loan doesn’t work for your situation, here are a couple alternative ways to buy land using your VA entitlement:

Option 1: Buy land separately, build with VA loan later

With this method, you purchase the land itself using cash or separate financing like a personal loan or land loan. Then later when you’re ready to build, you get a standard VA purchase loan just for the home construction costs.

The benefit is you can buy/hold the land now without timing pressures. The downside is you’ll have separate payments for the land and home.

Option 2: Buy land & build with other loan, refinance to VA later

Another approach is to buy the land and finance construction with a conventional loan or construction loan from a private lender. Once the home is built, you can refinance into a VA cash-out mortgage to get better long-term rates/terms.

The refinance process will be similar to doing a regular VA loan. This lets you buy on your own terms, then recoup your VA benefits later.

Key Takeaways on Buying Land with a VA Loan

You can’t use a VA loan just to purchase vacant land – it must include building a home.
VA construction loans let you buy land and build a home in one loan with no down payment.
Strict property requirements and quick construction timeline required with VA construction loans.
Alternatives include buying land separately or refinancing to VA after construction.

While doable, buying land with a VA loan has limitations. Be sure to understand the specifics before pursuing this path to owning rural property or building your dream home. Consulting a loan officer can help you navigate your options.

buying land with va loan

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.

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.

✅Purchasing land With using the VA loan

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.

How many times can you use a VA loan?

There is no maximum or limit on how many times you can use a VA loan. You can use a VA loan once, twice, three times or seven. As long as you have remaining entitlement, you typically always have the option to obtain another VA loan. Veterans United has even worked with a handful of Veterans on their 9th VA loan.

Can a VA loan be used to build a house?

Veterans can use a VA construction loan to build a single-family home on land they own or plan to purchase. However, the VA has restrictions about using the VA loan to purchase land. Veterans can’t buy land with a VA loan unless they immediately begin construction after purchase.

Can you buy land with a VA loan?

According to VA guidelines, eligible borrowers can use a VA loan to purchase land and property together – not land alone. That means you can’t buy a plot of land, hope for it to appreciate and resell it in the future. However, you can use the VA loan to purchase land directly, so long as you have plans to build a property there immediately.

What are the requirements for a VA land loan?

There are other requirements that the VA imposes on land loans. It will loan you money for: Construction of a new home on land you already own. Land that already has a residence on it. The purchase of land that you’re constructing a home on simultaneously. The purchase of farmland with an existing residence where you plan on living.

Can I buy a house with a VA loan?

Buy land using some other means of financing. Then use your VA loan benefit to fund the construction of your home. Buy land and construct your home using some other means of financing – typically a short-term construction loan.

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.