Can You Use a VA Loan for Land? A Complete Guide

You’re here because you want to know definitively: “Can you purchase land with a VA loan?“

The short answer is “YES,” you can use a VA loan to purchase land, but there are some important conditions and limitations to be aware of, which we’ll cover in this blog post.

The VA allows veterans to use their VA loan to buy land and construct a new home on the property at the same time.

VA loans must be used for eligible purchases, which includes the purchase or construct a residence, including a condominium or cooperative unit, to be owned and occupied by the veteran as a home.

Purchasing land to build your dream home can be an exciting endeavor. If you’re a veteran or servicemember, you may be wondering if you can use your VA home loan benefit to buy land.

The short answer is yes, you can use a VA loan for land – but there are some important caveats. In this comprehensive guide, we’ll explain everything you need to know about using a VA loan to purchase land and build a home

VA Loan Overview

First let’s start with a quick refresher on VA loans. VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs. They offer significant advantages for eligible borrowers including

No down payment required
No private mortgage insurance (PMI)
Flexible credit guidelines
Capping of loan fees and charges
Ability to roll closing costs into the loan

Thanks to the VA loan guarantee, lenders are willing to offer 100% financing to eligible veterans and servicemembers. This makes VA loans an attractive option for purchasing land and building a custom home.

Can You Buy Land With a VA Loan?

Technically, yes you can use a VA loan to purchase land. However, there are strict guidelines:

The land purchase must happen simultaneously with the construction of a home on that land.
You cannot obtain a VA loan only for the land purchase – it must always be tied to building a home.

This differs from other mortgage loans like FHA and conventional loans, which may allow you to buy land on its own. With a VA loan, the land purchase and home construction must happen together in one transaction.

VA Construction Loans

The main loan product that allows VA borrowers to buy land and build is called a VA construction loan. This is essentially a two-phase loan:

Land Purchase + Construction Phase
Permanent Mortgage Phase

During the first phase, the lender will disburse payments to cover the land purchase and construction costs. You will only be required to pay interest on the amount disbursed during this phase.

Once construction is complete, the loan converts to a permanent VA mortgage. This is when you will begin making principal and interest payments.

VA construction loans make it feasible for eligible borrowers to buy land and build without large down payments or cash reserves typically required for construction projects.

Steps to Buy Land and Build With a VA Loan

If you want to use a VA loan to buy land and build, follow these general steps:

Find land you want to purchase. It must meet VA requirements.
Find a builder you want to use for construction. They must be VA-approved.
Get pre-approved for a VA construction loan from a lender. Shop multiple lenders.
Make an offer to purchase the land contingent on securing the construction financing.
Work with lender and builder to submit construction plans and specifications for approval.
Close on the land and construction loan simultaneously. Construction begins.
Make interest-only payments during construction phase as needed.
Construction completes within one year. Loan converts to permanent VA mortgage.
Begin making principal and interest payments on your new home and land.

While the process involves extra steps compared to a traditional VA purchase loan, thousands of veterans and servicemembers have been able to achieve homeownership this way.

VA Loan Requirements for Land and Construction

In addition to general VA loan eligibility requirements, there are some special guidelines for construction loans:

The property can be 1-4 units, as long as you live in one. Up to 6 units if you go in with another eligible veteran.
The home must be built on a permanent foundation according to VA specifications. Manufactured homes usually don’t qualify.
The land and property must meet VA Minimum Property Requirements related to access, easements, utilities, environmental conditions, and more.
The property can’t be in a flood zone or subject to other hazards per VA guidelines.
You must use a VA-approved builder and appraiser.

The VA has extensive rules governing land and construction to limit risks for veterans and lenders. Be sure to read all requirements before pursuing this path.

Pros and Cons of VA Construction Loans

VA construction loans offer big benefits like zero down and no PMI. But there are some drawbacks to weigh as well:

Pros

Zero downpayment on land and construction
No PMI which saves money
One loan for land + construction at competitive rates
VA sets limits on fees to protect buyers
Can roll closing costs into loan amount

Cons

More complex process than buying existing home
Stricter property requirements
Monthly payments start sooner
Must use VA-approved builders
Tough to find lenders who offer these loans

In many cases, the pros outweigh the cons for eligible buyers who want to build their own home. But make sure you understand the tradeoffs before pursuing this path.

Alternatives to Buy Land With a VA Loan

If you don’t want to deal with the VA construction loan process, there are a couple alternative options to tap into your VA loan benefit:

Option 1:

Buy the land using a non-VA loan like a land loan or cash purchase. Then, obtain a separate VA loan to finance construction of the home only. This avoids the red tape of a VA construction loan, but you’ll have two separate loans and payments.

Option 2:

Buy the land and build the home using non-VA financing like a conventional construction loan. Once the home is completed, refinance into a VA cash-out mortgage to enjoy the benefits like lower rates and no PMI.

While more steps are involved, these options let you utilize your VA entitlement in other ways if a VA construction loan doesn’t work for your situation.

Finding a Lender For VA Construction Loans

The biggest challenge with VA construction loans is finding a lender who offers them. Very few lenders are set up for the unique requirements and processes of VA construction financing. Here are some tips for locating a lender:

Ask your realtor for lender referrals experienced with VA construction loans in your area.
Search online for VA construction lenders and compare interest rates and fees.
Check with local banks and credit unions to see if they offer VA construction loans.
Expand your search radius for lenders since very few will provide these loans.
Get pre-approved to see what lenders are willing to extend a VA construction loan to you.

Casting a wide net will help you discover lenders active with VA construction lending. Be prepared to deal with a little frustration as these loans are not very common.

Is a VA Construction Loan Right For You?

While they allow veterans and servicemembers to buy land and build with great financing terms, VA construction loans aren’t for everyone. Before jumping in, ask yourself:

Do I fully understand the VA construction loan process and guidelines?
Am I willing to take on the complexities of building a home?
Do I have the time and patience for the construction phase?
Am I ready to lock in payments on a new mortgage sooner than expected?
Is the property I want likely to appraise for the purchase price?

If you can answer “yes” to these questions, a VA construction loan may be a great fit. But if not, it may be better to consider alternative options for purchasing land.

The Bottom Line

VA loans can be used to buy land and build a home – but only through VA construction loans tied directly to the home construction. These loans offer wonderful benefits, but aren’t as readily available and require jumping through some extra hoops.

If you’re up for the challenge, a VA construction loan lets you tap into your VA entitlement to achieve the dream of building your own home on purchased land. Just be sure to research the process fully and find an experienced lender.

While it requires some effort, thousands of veterans have successfully built their dream home on land purchased with a VA construction loan. It can be done if you put in the work. Now that you understand the basics, you can determine if it’s the right option to help make your land ownership dreams a reality!

Can I Use My VA Loan to Buy Land?

Yes, you can use your VA loan to buy land; however, there are some important conditions and limitations to be aware of:

Construction Intent: The primary purpose of using a VA loan to purchase land is for building a home on that land. VA loans are not typically used for vacant land purchases without the intention of constructing a home within a reasonable timeframe.
Eligibility: To use a VA loan to buy land and build a home, you must meet the eligibility requirements for a VA loan. This typically involves being an eligible veteran, active-duty service member, member of the National Guard or Reserves, or a surviving spouse of a service member who died in the line of duty or because of a service-connected disability.
Entitlement: Your VA loan entitlement limits the total amount of the loan you can obtain without a down payment. This limit can vary depending on your location and whether you have used your VA loan entitlement before.
Construction Plans: When you use a VA loan for land and construction, you will need to have approved construction plans and obtain necessary permits. The VA lender will need to review and approve these plans.
Construction Timeline: The construction must typically start within a certain timeframe after the land purchase, usually within one year. The VA wants to ensure that the land purchase is not speculative and that the primary purpose is to build a home.
Loan Limits: VA loan limits vary by county, and there may be a maximum loan amount that you can borrow. Be sure to check the loan limits in your area.
Appraisal and Valuation: The land you intend to purchase will need to be appraised, and the VA lender will consider the appraised value when determining the loan amount. The appraisal must also consider the future value of the completed home.

It’s essential to work with a VA-approved lender who is experienced with VA land and construction loans, as the process can be more complex than a traditional VA home loan.

District Lending can guide you through the requirements and ensure that you meet all the necessary criteria for using a VA loan to purchase land and build a home.

In conclusion, purchasing land with a VA loan is indeed possible, but it comes with specific conditions and limitations designed to ensure that the primary purpose is to construct a home on the property.

Veterans and eligible individuals can use a VA loan to buy both land and property together, provided they have approved construction plans, intend to build on the land immediately, and meet various eligibility criteria.

While these requirements may seem stringent, they are in place to safeguard the intent of VA loans and ensure that they are used for their intended purpose of helping veterans secure a home.

To navigate the complexities of VA land and construction loans, it is crucial to collaborate with a knowledgeable VA-approved lender like District Lending, who can guide you through the process and help you fulfill all the necessary criteria for purchasing land and building your dream home with a VA loan.

How Can You Purchase Land With a VA Loan?

can you use a va loan for land

According to VA loan guidelines, eligible borrowers can use a VA loan to buy land and property together, but not land by itself.

That means you can’t buy a piece of land with your VA loan and sit on it.

You can use your VA loan to buy land directly if you also have plans to build on the property right away.

You can apply for a combined purchase and construction loan through a VA-approved lender like District Lending.

You’ll need to submit formal construction plans and, upon completion, have the finished property inspected.

Additionally, your construction plans must meet the following criteria:

You must work with a VA-approved builder with valid VA identification.
You cannot build a home with more than four units. Each unit must have its own utility connections, and you must occupy one of the units as your primary residence.
Your property must be built on and affixed to a permanent foundation.
Your property must conform to the VA’s minimum property requirements. It must also meet federal and local building requirements.
Your land cannot be in a flood or noise zone, near a landfill, or in an area vulnerable to major natural disasters like landslides or earthquakes.

Can You Use the VA Loan to Buy Land?

FAQ

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 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.

What can I use my VA home loan for?

Veterans and service members can use the VA loan to purchase new or existing homes with $0 down payment. VA purchase loans also allow Veterans to buy single-family homes, condominiums, manufactured homes, multiunit properties (like a duplex) and even new construction. Policies and guidelines can vary by lender.

Can I use my VA home loan for an RV?

Can You Use a VA Loan for a Boat or RV? Unfortunately, you cannot use a VA loan to purchase a boat or RV. These types of vehicles do not meet the minimum property requirements set out by the VA. However, if you’re in the market for either of these items, there are other financing options available to you.

Can a VA loan be used to buy land?

However, buyers can only use a VA loan to secure land if they plan to build right away. To use a VA loan to buy land and build a home: The property can be a single-family home, a manufactured home or a multi-family home with up to four units.

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.

Can veterans buy land with a VA construction loan?

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 buy land*. Veterans can’t buy land with a VA loan unless they immediately begin construction after purchase.*

Can I buy a house using a VA loan?

You cannot buy a house directly using a VA loan for the land purchase. Instead, you can buy land using some other means of financing and then use your VA loan benefit to fund the construction of your home.