VA Loans: How They Work and Qualifications for 2022
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How to Get a VA Land Loan

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For qualified members of the military, veterans and eligible spouses, loans backed by the Department of Veterans Affairs (VA) offer an attractive way to buy or build a home. VA loans often come with no down payment and better terms than what a private lender or credit union might offer. However, you can also use a VA loan to buy land — as long as the loan will also be used to build a house.

How to buy land with a VA loan

It’s not possible to get a land loan that’s specific for that purpose from the VA. However, if you’re already planning to build a home on a specific plot of land, a VA loan can make it easier to finance the purchase of that land.

Here are your options overall:

Use a VA loan to buy the land, and then start construction. A VA construction loan lets you roll in the costs of building a home and the land purchase into one mortgage, with no down payment and fewer qualifying guidelines than conventional construction loans. Keep in mind that not all lenders who offer VA loans offer VA construction loans.

Buy the land with alternative financing, then use the VA loan to build a home. It might be possible to buy the land with a personal loan or cash reserves, then use a VA construction loan to build your new home.

Buy the land and construct the home with alternative funding, then refinance the constructed home with a VA loan. A VA-backed cash-out refinance loan might be able to offer you better terms than your original loan, as well as a cash payout for possibly paying off other debts. If you choose this option, your home will have to meet VA loan requirements, like a VA-approved appraisal. You might also need to pay a VA funding fee at your closing, in addition to other closing costs.

Requirements for VA land loans

Besides meeting individual eligibility requirements for a VA loan, you’ll need to make sure the land you’re eyeing meets certain VA criteria. These requirements have to do with accessibility, safety and habitability, and are as follows:

Street access: Properties must have pedestrian and vehicle access from a public or private street.

Easements: You must be able to access 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 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 will need to 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 will need to be evaluated for potential noise and safety concerns.

Using your VA benefits to buy land

You have two alternatives, described below:

VA farm loans

One way to purchase land is through a VA farm loan that allows qualified buyers to become farm owners. The catch: The property must already have a personal dwelling on it, so you can’t use the loan to simply buy acreage. You’ll also need to use the land for residential purposes, which excludes buying a farm business.

VA construction loans

A VA construction loan gives current service members and veterans the option to build a new home or finish constructing one. You can use this loan to buy land, as long as you also build a home on it.

This type of loan has two options. Both are considered to be “construction to permanent” loans because the construction part of the loan is converted to a permanent mortgage once the home is built.

  • One-time close loan: With this option, you’ll close both the construction loan and permanent financing at the same time. Prior to construction, you’ll set up the permanent loan financing and the final terms will kick in once construction is complete.
  • Two-time close loan: You’ll close on one loan before the start of construction and then, once it’s done, close on a second loan with permanent financing to take out or replace the initial loan. With this type of construction, you’ll actually be closing on two different loans.

Frequently asked questions

Can you get a VA loan just to buy land?

The short answer is no. VA loans are designed to offer service members and veterans an opportunity to be a homeowner, not a landowner. That said, you may be able to use a VA construction loan that offers a chance to buy land before using it to construct a new home. If you’re interested in farmland, a VA farm loan might work, as long as the land already includes a personal dwelling.

How many acres can you buy with a VA loan?

For farms, there is no acreage cap. For non-farm land, lenders may have their own guidelines.

How much can you borrow for a VA land loan?

VA construction loans and VA farm loans are the two types of land-buying options offered by the VA. The amount a VA loan will let you borrow will depend on your VA loan entitlement, and you can receive this information by first asking for your VA certificate of eligibility.

If you have full entitlement, there won’t be a loan limit. But if you only have partial entitlement, the limits will be the same as the conforming loan limits that the Federal Housing Finance Agency (FHFA) sets every year, according to the county and the previous year’s average home sale price in that county. In 2022, the limits range from $647,200 for most of the U.S. to $970,800 in certain high-cost areas.

 

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