Can You Buy Land With a VA Home Loan?

The Department of Veterans Affairs (VA) home loan program offers significant benefits to eligible service members, veterans, and surviving spouses, primarily to assist in acquiring a primary residence. The program aims to provide a pathway to a home, not merely an investment in undeveloped property.

Understanding VA Loan Eligibility for Land

VA loans are generally not intended for the direct purchase of raw land. The core purpose of the VA loan program is to finance a primary residence, meaning a property where the borrower will live. This fundamental principle dictates that the land must be “incident to the dwelling” or “necessary for the reasonable enjoyment of the dwelling” for a VA loan to apply. Since the VA guarantees the loan, the home itself serves as the primary collateral, making undeveloped land alone insufficient to meet this requirement.

Purchasing raw land for speculative purposes, such as holding it for future appreciation or for recreational use without a dwelling, does not align with the VA’s mission of promoting homeownership. Therefore, a VA loan cannot typically be used to buy a vacant plot of land if there are no immediate plans or existing structures for a primary residence.

Acquiring Land with an Existing Home

A VA loan can be used to acquire land when it is part of a property that includes an existing, eligible primary residence. If the property being purchased has a single-family home, a condominium unit, or even a multi-unit property where the veteran intends to occupy one unit, the VA loan can cover the entire purchase, including the land on which the structure sits. The property must meet the VA’s Minimum Property Requirements (MPRs), which ensure the home is safe, sanitary, and structurally sound.

The land associated with an existing home must be considered reasonable for the dwelling. While the VA does not set specific acreage limits, the size of the land should be consistent with typical residential use in the area and necessary for the home’s enjoyment. For example, a VA loan can be used for a farm residence if it includes an existing home that will be the veteran’s primary dwelling, provided the funds are not used to buy a business. The veteran must certify their intent to occupy the property as their primary residence, generally within 60 days of closing, though exceptions can apply.

Financing Land for New Construction

Financing land with a VA loan becomes possible when it is an integral part of a new home construction project. The land is not financed in isolation but as a component of a VA construction loan. Two common structures exist: one-time close and two-time close loans.

A one-time close VA construction loan combines the financing for the land, construction, and permanent mortgage into a single loan with one closing. This streamlines the process, potentially reducing paperwork and some closing costs. Borrowers typically make no payments during the construction phase, only beginning principal and interest payments once the home is complete and the loan converts to a permanent mortgage.

Conversely, a two-time close loan involves two separate closings: one for the construction loan (which may include the land purchase) and a second for the permanent VA mortgage once construction is finished. This option can offer more flexibility, such as the ability to secure a better interest rate for the permanent loan after construction. For both types, the builder must be registered with the VA and adhere to VA-approved plans, and the completed property must meet all MPRs. Funds are disbursed in draws as construction progresses, with inspections verifying completed work.

Considering Other Land Financing Options

For individuals seeking to purchase raw land without immediate construction plans or an existing dwelling, VA loans are not suitable. Conventional land loans are a common alternative, though they differ significantly from traditional mortgages. These loans often come with higher interest rates and typically require larger down payments, ranging from 20% to 50% of the purchase price, due to the increased risk lenders associate with undeveloped land. Loan terms for conventional land loans are generally shorter, often between 3 to 10 years, and some may involve balloon payments at the end of the term.

Seller financing presents another option, where the landowner directly provides a loan to the buyer, often with negotiable terms. This can be beneficial for buyers who may not qualify for traditional loans. Personal loans may also be considered for smaller land purchases, offering quick funding without collateral, but they typically have higher interest rates and shorter repayment periods, usually 12 to 60 months. These non-VA financing options do not involve the VA loan program and require careful consideration of terms, interest rates, and repayment structures.