Can I Use My VA Home Loan to Buy Land?
The Department of Veterans Affairs allows borrowers to use a VA home loan to buy land and construct a new home on a piece of property as an alternative to buying a pre-built home.
There are restrictions placed on the way the funds can be allocated. VA loans must be used for eligible purchases, which allows the Veteran to “purchase or construct a residence, including a condominium or cooperative unit, to be owned and occupied by the veteran as a home.”
The loans can include the land where the home will be situated and may also be guaranteed for the construction of a residence on land the borrower already owns. It’s also possible to use the funds to refinance a purchase money mortgage or contract for the purchase of the land.
The VA home loan to buy land cannot be made under the VA program for unimproved land with a future intent to improve.
The loan also must be closed before construction can begin to allow the money to be allocated to pay for the land the home will reside on with the remainder placed into an escrow account.
This gives the bank the authority to distribute the funds and ensures that the builder can receive payment during construction.
This isn’t only applicable to those who want to buy land that is for sale. If you meet the requirements for a VA loan, land that you already have in your possession qualifies for funding under the program.
The simple answer to whether you can use a VA home loan to buy land is yes. It can’t be in a flood zone, in an airport noise zone, and must be away from high volt electric lines or unstable land conditions where landslides, sinkholes or earthquakes are common.
Finding the Right Lender
The primary problem you might find with using a VA loan for construction is locating a lender who will allow these types of loans for construction. There are no regulations in place that require lenders to finance construction loans.
You might have to try approaching a few different lenders before you’ll find one that is willing to work with you on the project.
In some cases, it is necessary for you to first get a conventional loan from a community lender or builder for the initial financing, and when construction is complete, refinance it under the terms found in the conventional VA loan.
The best way to ensure that you don’t waste your time applying for financing that isn’t relevant to your home-buying needs is to ask the lender questions right from the start.
If you don’t find what you’re looking for the first time, do research and locate a lender close by that will offer financing to put you in your dream home once and for all.
Better yet, call me – I can steer you through the process and help you find the right VA home loan at the best interest rate.