Tuesday, June 19, 2012

Can You Buy Land With a VA Loan

By Bethany Eanes

The United States Department of Veterans Affairs (VA) offers loan guarantee assistance to veterans and active duty military personnel who qualify. This program assists individuals who are serving or who have served in purchasing constructed homes. The program does not support land purchases. However, you may receive land loan assistance from a state agency to assist you.

Any active-duty military member or veteran in good standing can apply for a VA home loan guaranty. This guaranty is like home loan insurance from the VA. You will still receive a home loan from a conventional lender. The VA simply guarantees the payments, meaning it will take over the loan if you are unable to pay. In exchange for this additional insurance, the lender offers great terms, including low down payment options, low interest rates and easy refinancing.

VA home loans hold a high amount of regulation to assure the VA does not lose money. For example, you will be required to have a stable income and a good credit history. You will be required to cover closing costs on your loan, including title insurance, where required by the lender. Furthermore, the VA will require a home inspection to validate the value of your property is not below the loan size. Since this essential step cannot be completed with a land purchase, the VA does not guarantee loans for land.

Land loans are tricky because they are temporary and the value of a piece of land is often harder to determine than the value of a finished home. A loan may be issued in anticipation of home construction, that construction estimate may change, and the ultimate value of the home may not reflect its original anticipated value. All of these factors usually result in unique land loan financing. A borrower may need to take one loan to purchase the land, a bridge loan to help with construction costs, then a mortgage to consolidate these separate forms of financing into a permanent home loan. The VA does not currently have options to assist in this complicated process.

Many states offer support to their veterans, and this can extend to assistance in purchasing homes or property. For example, the Veterans Land Board of Texas offers loan support to state veterans looking to purchase land. By exploring these options, you may find similar benefits to VA home loans provided through another support office (see Resources).


http://www.lenderva.com

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