Purchasing land can be a daunting task, especially when it comes to financing. But, did you know that as a veteran, you can use a VA loan to help buy land?
With a VA loan for land, eligible veterans like me can secure financing to purchase land for various purposes such as building a home or a farm. It's essential to understand the unique aspects, requirements, and qualifications for a VA land loan before applying.
As a veteran who has utilized VA land loands, I have first-hand experience in finding great deals with this loan program. In this article, I am going to cover the ins and outs of VA land loans to help you find a great plot of land on your next real estate acquisition.
- VA loans can be utilized to purchase land, offering financial support to eligible veterans.
- Its vital to understand the requirements, qualifications, and advantages of VA land loans.
- VA farm loans can cater to land purchases including working farms.
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Understanding VA Loans
As a service member or veteran, you've probably heard about VA loans. They are a unique type of mortgage loan that's exclusively available to military personnel, veterans, and spouses who fulfill the VA’s eligibility requirements.
VA loans are backed by the Department of Veterans Affairs, making it possible for lenders to offer some amazing benefits.
How to Use a VA Loan to Purchase Land
If you're a veteran like me, you might be interested in purchasing land and wondering if you can use a VA loan to do so. Good news! Yes, you can use a VA loan to purchase land under certain circumstances.
VA Construction Loans
One way to use a VA loan for a land purchase is when constructing a new home on land you already own or want to buy.
In this case, a VA construction loan would roll the costs of building a home and the land purchase into one mortgage, without a down payment and fewer qualifying guidelines than conventional construction loans.
VA Purchase Loan
Another option is buying land that already has a residence on it. This can include a single-family home, a multi-unit property, or a condo in a VA-approved project. The VA Purchase Loan and the Native American Direct Loan (NADL) cover these types of property expenses.
For those looking at farmland, a VA loan can also be used to buy farmland with an existing residence that you're planning on living in.
Important Loan Aspects
No Down Payment
When it comes to VA land loans, there are several aspects that borrowers should consider. One of the main advantages of VA loans is that they often do not require a down payment.
This is a significant benefit, as it helps veterans save money and get their dream property sooner.
Low Interest Rates
Another significant aspect of VA loans is the favorable terms and competitive interest rates. Unlike conventional loans, VA loans usually have a lower interest rate, which can potentially save borrowers thousands of dollars over the life of the loan.
As a veteran, it's crucial to compare rates from different lenders to ensure you get the best deal possible.
VA loans also come with another advantage - the absence of private mortgage insurance (PMI). PMI is an additional cost that's typically required for borrowers with a down payment of less than 20% on a conventional loan.
However, with a VA home loan, you won't need to worry about PMI, further reducing your monthly payments.
Before applying for a VA land loan, it's essential to understand the VA loan entitlement and how it affects your borrowing power.
VA loan entitlement is the amount of money the government guarantees on your behalf, which affects the loan limit and helps keep interest rates low. Ensuring that you have the necessary entitlement available is key to a smooth and successful loan application process.
Lastly, remember to consider closing costs when obtaining a VA loan for land. While some fees may be negotiable or rolled into the loan, there are limits to what the VA allows. It's essential to be prepared to cover these costs when the time comes to finalize the property purchase.
By keeping these important loan aspects in mind, I am confident that you can successfully navigate the process of obtaining a VA land loan and secure a fantastic deal.
Essential Requirements and Qualifications
When it comes to securing a VA loan for land, there are certain requirements and qualifications that I have to meet.
The first step is obtaining a VA certificate of eligibility (COE) to prove my military service and entitlement to the VA loan benefits.
One critical factor in getting a VA land loan is that the land I plan to purchase must be for my primary residence. It cannot be for investment or vacation properties.
I will also need to meet certain eligibility requirements related to my military service, credit score, and income. Each private lender and housing finance agency may have its specific rules in this regard.
To ensure that you are getting a fair deal, I recommend working with a VA approved lender that strictly follows VA guidelines.
Loan Benefits Vary
A significant advantage of VA loans is the possibility of getting financing with no down payment. However, I should keep in mind that not all lenders who offer VA loans extend this benefit to VA construction loans. So, I may need to shop around to find a suitable financing option.
My loan entitlement also plays an essential role in determining how much I can borrow for my land purchase. Having full entitlement means there won't be a loan limit, giving me more flexibility in choosing the right piece of land.
When I find the perfect plot of land to build my dream home, I should ensure it meets specific requirements for proper drainage, potable water supply, sewage systems, and local building codes, as mentioned on Military Money.
Meeting these standards will increase my chances of qualifying for a VA land loan and put me in an excellent position to snag a great deal.
Different Financing Options
When it comes to purchasing land with a VA loan, there are several financing options for us to consider. The VA offers two primary land-buying options: the VA construction loan and the VA farm loan. These options make financing easier for veterans like me who want to buy land and build my dream home.
VA Construction Loan
With a VA construction loan, I can roll in the costs of building a home and the land purchase into one mortgage. The best part? The loan requires no down payment and has fewer qualifying guidelines compared to conventional construction loans. The catch is that not all lenders who offer VA loans provide VA construction loans, so I'll have to find one that does.
VA Farm Loan
Now, if I'm thinking of starting a farm, I might also consider the VA farm loan. This option is specifically designed for rural property financing. Just like the VA construction loan, my VA entitlement determines the amount I can borrow. A VA certificate of eligibility is necessary to find out how much I qualify for.
One-Time and Two-Time Close Loans
Alternatively, I can explore other types of loans such as one-time close and two-time close loans.
The one-time close loan is handy because it combines land purchase, construction, and permanent financing into a single loan. This means I'll only have to go through one set of closing costs, saving time and money.
On the other hand, a two-time close loan separates the land purchase and construction financing, meaning I'll need to refinance my construction loan into a permanent loan once the project is complete. This split can lead to higher costs and more paperwork in the long run.
Conforming Loan Limits
Lastly, I must remember to consider conforming loan limits when applying for a loan. These limits vary depending on the area and change annually. I'll need to ensure that the loan amount does not exceed the conforming loan limits in my area to avoid any complications.
Now that I know the different financing options available to me, I can confidently move forward with my plans to purchase land and build my dream home using my VA benefits.
Role of Department of Veterans Affairs
As someone who has looked into VA loans, I know the importance of the role played by the Department of Veterans Affairs in the entire process. They administer VA land loan benefits which make it possible for veterans and military service members to purchase land and construct homes.
The VA helps by not only insuring the mortgage but also working closely with VA-approved lenders.
This makes the entire VA loan entitlement process seamless, as they offer competitive benefits like no down payment requirement, low-interest rates, and no private mortgage insurance requirement as I learned from my research.
VA Guidelines Assistance
Utilizing a VA land loan can allow military personnel like me to buy land to construct a home or even refinance an existing mortgage. The intricacy of the process lies in the hands of the Department of Veterans Affairs (VA), which provides detailed guidelines and requirements for eligibility, making sure that the program serves its purpose in offering financial support to veterans and their families.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling