How to Buy Land with a VA Loan
The VA Home Loan program administered by the Department of Veterans Affairs, enables eligible borrowers to not only purchase an already built property but also invest in a plot of land with the intention to construct a new residential structure.
Eligibility criteria and restrictions are implemented in the utilization of VA loan resources.
These loans can be used for specific purchases, implying that the borrower, who is a Veteran, can “purchase or construct a residence, including a condominium unit to be owned and occupied by the veteran as a home− the loan may include the simultaneous purchase of the land on which the residence is situated or will be situated.” Per the VA lenders handbook.
The loan can cover the cost of the land where the proposed dwelling will be built, and it can also be guaranteed for the building of a residence on a plot that the borrower already owns. Moreover, these funds can be utilized to refinance an existing purchase mortgage or a land acquisition contract.
Restrictions Under the VA loan program
VA home loans for purchasing land are not approved if the aim is to acquire unimproved land for future enhancements. You have to do it all in one fell swoop.
The loan closure must happen prior to the commencement of construction. This stipulation ensures the allocation of funds for the land purchase, with the remaining balance placed into an escrow account.
This practice provides the bank with the authorization to dispense funds and guarantee the builder’s payment during the construction phase.
Keep this in mind, as you’ll want to start early getting the VA loan finalized to ensure that there are no delays when building your new home. If you can time it right, you’ll give the construction crew the most time to work on your home without being in excessive rainfall or having frozen ground in Washington state. That can cause delays.
This eligibility extends to those intending to buy listed land or if you are eligible for a VA loan, any land currently under your ownership qualifies for financing under this program.
Essentially, it is permissible to use a VA home loan to buy land, subject to some limitations.
The land must be located outside flood and high noise zones, such as those near airports, away from high voltage power lines, and must not be in an area prone to geological instabilities like landslides, sinkholes or earthquakes.
As a general rule of thumb, the VA Minimum Property Requirements (MPRs) will require the home to pass the following during an inspection. Please note that this may not be a full list of MPRs. For your convenience, you can find those here.
- Working electric, heating and cooling systems
- Adequate roofing that will last the foreseeable future
- Sufficient in size for basic living necessities
- Clean, continuous water supply with sanitary facilities
- Free of lead-based paint
- Free of wood destroying insects, fungus and dry rot
- Safe and sanitary sewage disposal
- Accessible from an all-weather public or private street
- Attics and crawl spaces must be accessible and properly vented
Choosing Your VA Land Loan Lender
A crucial challenge when using a VA loan for construction is to find a lender who is comfortable with such loans for construction purposes. As no mandated regulations require lenders to provide financing for construction loans. It’s not a common scenario for most lenders, but we’ve been lending since 2001, so this isn’t our first rodeo.
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Founder and President at West Coast Veterans
Hi, I’m Tim Barlow, the Founder and President of West Coast Veterans, a licensed mortgage brokerage specializing in veteran-focused lending. We’ve been serving the needs of active- duty and veteran homeowners for decades, helping them to maximize their VA loan benefits.
Whether you’re a first-time home buyer using your VA loan eligibility or this is your second time making use of your VA loan benefits, we can help you sort out all the complexities, allowing you to be stress-free during the loan process.