If you are a veteran or currently serving in the military, you may be wondering if you can use a VA loan to purchase land. The answer is yes – and in this blog post, we will tell you everything you need to know about using a VA loan to buy land with the intention to construct a new home simultaneously. We will cover topics such as: what is considered land, how to find land that is eligible for a VA loan, and more!
When most people think of a VA loan, they think of using it to purchase a home. However, the VA loan program can also be used to finance the purchase of land – and there are some key benefits that make it an attractive option for veterans and active duty military members.
First, let’s start with defining what is considered “land” in this context. Land is any piece of property that is not attached to a dwelling or other structure. This means that rural property or even vacant lots in urban areas can be purchased using a VA loan.
One of the benefits of using a VA loan to buy land is that there is no minimum purchase price. Whether you are looking to buy a small parcel of land or a large piece of property, the VA loan can be used.
Another benefit is that you can use the VA loan to finance up to 100% of the purchase price – meaning you don’t need a down payment. This can make it easier to buy land, especially if you are trying to construct your new home simultaneously.
Finding The Land To Buy
To get started with using a VA loan to buy land, you will need to find a property that is eligible for financing. All land must be in a VA-eligible location to be purchased using a VA loan.
One way to find out if a piece of land is eligible for VA financing is to check the VA’s website. They have a search tool that lets you enter in the address or general location of the property you are interested in and will tell you if it is eligible.
You can also contact a VA-approved lender to ask about specific properties. They will be able to tell you if a particular piece of land is eligible for financing.
Once you have found an eligible piece of land, you will need to get an appraisal. The appraised value of the land must meet or exceed the purchase price for the loan to be approved. Here are some struct requirements when looking for land:
- 1. The construction on the land must be no more than four units. Each unit must have its own water, sewage, gas, and electricity connections, and you must live in one of the units as your primary residence.
- 2. The property must be affixed to a permanent foundation.
- 3. The property must meet the VA’s minimum property requirements and must comply with all federal and local building standards.
- 4. The land can’t be located in a flood or noise zone (airstrip, highway, railroad tracks, etc.).
- 5. The land can’t be located near a landfill, dump, or hazardous material facility.
- 6. The land can’t be vulnerable to landslides, earthquakes, or other geological instabilities.
Qualifying For the Loan
One of the benefits of using a VA loan to purchase land for construction is that there is no minimum credit score required but most lenders will require a minimum credit score of 580-620 to qualify for a VA loan. This means that even if you have bad credit, you may still be eligible for this type of financing. Another benefit is that there is no down payment required – making it easier to buy land without having to come up with a large sum of money upfront.
If you are ready to start looking for land, we encourage you to work with a VA-approved lender. They can help you find the perfect piece of property and guide you through the process of securing financing for a contraction to perm loan.
Working With EFG as your VA-approved Lender
At EFG, we are proud to work with veterans and active-duty military members who are looking to purchase land with the intention of constructing a home using a VA loan. We have a team of experts who are ready to help you find the perfect property and secure financing. We can provide you with a preapproval letter here.