At the end of the day, you can use a VA loan to purchase land, but it will come with some strict stipulations. Learn about these requirements and how you can purchase land with a VA loan.
Between money-saving benefits, such as $0 down and no mortgage insurance, veterans and service members wishing to purchase a home will be hard-pressed to find a better option than the VA loan.
But what if you don't wish to purchase a previously occupied home? Can the VA loan help you buy land and build a custom, more personalized home?
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.
It sounds confusing, but the gist is simple: Buying only land? A VA loan won't work. Buying land and building on it right away? The VA will allow it.
There are generally three options if you're looking to buy land with your VA loan benefits:
If you already own land or inherited a parcel of it, you're free to use a VA loan to build upon it. And if you used a different loan type to purchase the land initially, you may be able to refinance once home construction is complete.
As with all VA loans, there are some particular requirements you'll need to meet if you plan to buy land and construct a property using your benefits.
Here are the big ones:
Of course, you'll also need a valid Certificate of Eligibility to be eligible, and your builder must have a valid VA ID. Learn more about the ins and outs of VA construction loans here.
While the VA technically allows it, most lenders don't offer VA loans for purchasing land and construction. These types of loans are generally riskier and, if you do find a lender that offers one, you may need to make a down payment to offset the risk.
You can avoid this by using a construction loan or other financing product to fund your land purchase and home construction, then refinance into a VA loan once the home is built. In this scenario, you'd then be eligible for the traditional, zero-down payment VA loan.
At the end of the day, you can use a VA loan to purchase land, but it will come with some strict stipulations. It also may not be the easiest or most affordable route toward homeownership.
A VA loan is a mortgage option issued by private lenders and partially backed, or guaranteed, by the Department of Veterans Affairs. Here we look at how VA loans work and what most borrowers don’t know about the program.
Your Certificate of Eligibility (COE) verifies you meet the military service requirements for a VA loan. However, not everyone knows there are multiple ways to obtain your COE – some easier than others.