Thursday, May 10, 2018

A Guide to Buying Land with a VA Loan

Buying a home is a dream of many Americans – but for some, that dream involves building a new home to their individual specifications. Fortunately for eligible U.S. military veterans, it is possible to use VA loans for land purchases as well as for the purchase of already-completed homes.

If you are interested in buying land and building a home from scratch, it is important that you know the special requirements involved in using VA loans for land.

Conditions for Using a VA Loan to Buy Land

First, if you are interested in any kind of VA loan, you should research the general eligibility requirements, which are based on your military service, your credit history, and your current financial resources. Then, if you want to buy land to build a new home, you need to know some special conditions that apply to using VA loans for land:
1. The purchase must be for the purpose of building a primary residence

The purchase of the land must be pursuant to a plan to also build or otherwise locate on the property an eligible structure for use as the borrower’s primary residence. Eligible structures are generally buildings consisting of 1 to 4 residential units.

2. The land cannot be located in an area considered at risk of flooding

This may include locations designated as Special Flood Hazard Areas as well as other areas prone to flooding. Certain coastal barrier areas are also ineligible. Here’s a tip – if flood insurance is generally not available in an area, there’s a good chance you won’t be able to use a VA loan to buy land there.

3. The land cannot be in an airport noise zone

While this restriction does not apply to existing homes, it does come into play if you plan to build a new one.

4. The land must be situated away from certain utility easements

These include easements for high-pressure gas, liquid petroleum, or high voltage electrical lines. If any part of the proposed residence is on such an easement, the project is ineligible for a VA loan.

5. The area cannot be susceptible to geologic instability

This includes earthquakes, landslides, or other forms of instability, such as sink holes.

6. The builder must provide a reasonable basis for appraisal

This includes a detailed plan of the proposed building drawn up by a qualified professional.

7. The proposed home must be attached to a permanent foundation

You can use a VA loan to purchase land and move a mobile home onto it, but that home must then be attached to permanent foundation. In other words, that home can no longer be mobile.

8. Construction must comply with federal and local building requirements

Your best bet is to work with a builder familiar with Department of Housing and Urban Development requirements, as well as any applicable state and local zoning laws and building codes.

9. You may be able to refinance land you already own

If you already own land that you want to build on, you may be able to refinance the loan you used to purchase that land with a VA loan, as long as the property meets VA appraisal standards.

Though millions share the dream of owning a home, that dream is often a very individual thing. You may have very particular ideas about what that home should include and where it should be located. Using VA loans for land is one way veterans can begin to build their dreams to their own individual specifications.