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VA Loan Reader Question: Buying Land With a VA-Insured Loan

A reader asks, “Can I use a VA loan to buy land in order to build on?”

There are two sections of the VA loan rules which offer guidance for the eligible uses of VA loans. One is Chapter 3 of the VA Lender’s Handbook, which states the following in Section 2, Eligible Loan Purposes:

“The law authorizes VA to guarantee loans made to eligible veterans only for the following purposes…” which include “To purchase or construct a residence, including a condominium or cooperative unit, to be owned and occupied by the veteran as a home…”

Some private-company VA loan websites erroneously report, “The VA home loan cannot be used to purchase vacant land. As per the US Department of Veteran Affairs regulations, the VA loan can only be used for an existing dwelling.”

This is not true, as per Chapter 3, Section 2 of the VA Lender’s Handbook, which states, “…the loan may include simultaneous purchase of the land on which the residence is situated or will be situated”.

The other VA loan rules that apply for this issue are the rules for VA appraisals. VA Appraisal Guidelines, page 11 Section 3 states, “Dwellings where construction has not started or is under construction but not complete to the customer preference stage are considered proposed construction.  A home may be appraised from plans and specifications or a model home…” It’s important to note that the appraisal requires a dwelling to be appraised, proposed or existing. Without a VA appraisal, there can be no VA loan.

VA loan rules do not allow purchase of undeveloped land or vacant lots all by themselves–any purchase of such property must be in conjunction with a construction loan. The borrower cannot buy land with a VA loan with non-specific plans to develop the land “sometime in the future”.

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About Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.

26 Responses to VA Loan Reader Question: Buying Land With a VA-Insured Loan

  1. jackie allen says:

    how long does one have before a house must be built?can it be a small cabin?

    • Joe Wallace says:

      VA requires a construction loan with a specific start date for work to be done. Call the VA directly at 1-800-827-1000 for additional details.

  2. kody stahl says:

    i would like to get a va loan to purchase a 350 acre farm. is it possible or not? i have heard yes and no…. the farm already has a house on it.

    • Joe Wallace says:

      VA loan rules do allow the purchase of a farm, however, Chapter 7 of the VA Lender’s Handbook says:

      “”The loan cannot cover:

      the nonresidential value of farm land in excess of the homesite,

      the barn, silo, or other outbuildings necessary to the operation of the farm”

  3. Mike says:

    I found an architect that ships prefabricated homes nationwide and would like to purchase a plot of land on which to have such a dwelling. Would all this be possible with VA?

    • Joe Wallace says:

      The VA does approve for loans for purchase of land and manufactured homes. Naturally much depends on the circumstances, but it is possible to get a VA loan for both at the same time.

  4. Robert Hernandez says:

    Is it possible to get a v a loan to buy 24 acres with small cabin water and electric for hunting and livestock grazing.

  5. chris Hannas says:

    I’m a Realtor and want to know if a veteran can purchase a lot improved or unIimproved with a VA Loan and if so, what is the maximum loan amount for the lot? If there IS a maximum loan amount, can the veteran acquire a second mortgage to increase that land value over and above the maximum VA Loan amount.
    Example: List price $180,000, appraised value $180,000. VA Loan
    $100,000 second mortgage or “gift” of $80,000

    • Joe Wallace says:

      VA loans only permit the purchase of undeveloped land with a specific commitment to build–there must be a construction date. The purchase of undeveloped property with no specific construction plan is not allowed under the VA loan program.

  6. Jonathan Evans says:

    Do you recommend any banks that work with VA construction loans?

  7. STEVE GRIFFIN says:

    how long can the construction date be put out, i would like to purchase a 135 ac tract to build on in the future for my primary residence

    • Joe Wallace says:

      VA loans can’t be issued for unimproved land unless there is a specific date for construction. “Sometime in the future” does not qualify according to VA loan rules.

  8. Anthony says:

    I’m wanting to use my VA loan for 34 acres of timber/farm with a cabin. The cabin has electricity, no running water or bathroom. If I proposed to add on the necessary requirements, what is the TIME FRAME in which construction has to be begun. Can I get the loan today if I state that next year (Apr. 2014) I will begin the construction? Is 1 year too far out to make the “hunting cabin” VA approveable? I would like to buy the land now, pay on it for a year then do the work over the next year (vacation) to be liveable by 2014.

  9. Michael says:

    Do I have to make a down payment of 20% if I want to purchase land with a construction loan or can I still get 100% financing?

    • Joe Wallace says:

      Are you asking about VA loans specifically? FYI, if you get a VA loan to purchase land it must be done in conjunction with a construction loan with a specific build date–borrowers can’t be approved for a VA loan with a construction date “sometime in the future”.

      • Fred says:

        Will the VA loan cover the land and construction, or will I need two separate loans? As I have read through these posts, some of the information seems conflicting. “A home may be appraised from plans and specifications or a model home…” / “FYI, if you get a VA loan to purchase land it must be done in conjunction with a construction loan…”

        • Joe Wallace says:

          According to the VA Lender’s Handbook, VA loans can be used for the following purposes: “To purchase or construct a residence, including a condominium or cooperative unit, to be owned and occupied by the veteran as a home
          − the loan may include simultaneous purchase of the land on which the residence is situated or will be situated,
          − loans may also be guaranteed for the construction of a residence on land already owned by the veteran (a portion of the loan may be used to refinance a purchase money mortgage or sales contract for the purchase of the land, subject to reasonable value requirements),”

  10. Bridgette L Davidson says:

    I am interested in purchasing land, with an construction start date in 2020. Is this possible, if the buyer has plans to purchase the land asap.

  11. Cristopher Deaton says:

    Would the va approve a loan for me to buy land (50 acres) and start building on it 01july2018?

    • Joe Wallace says:

      Do you have a contract to build? Lender standards may require you to have the contract or construction loan in hand to do what you suggest. According to the VA Lender’s Handbook: “Purchase of unimproved land with the intent to improve it at some future date (that is, the land purchase is not in conjunction with a construction loan)” are not permitted.

  12. Mike Tanner says:

    As a veteran, are VA loans available to purchase a titled lot in an RV resort.

    • Joe Wallace says:

      VA loans are not available for recreational vehicles or any other type of dwelling (portable or not) that cannot be legally classified as “real property”. If you were to purchase land with a VA loan, that purchase would be contingent on having a construction commitment to build a home with a permanent foundation on the lot.

  13. Britt says:

    My family has a 200 acre farm with a house on it. Could I use my VA loan to buy the house and half the farm?

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