Not everyone wants a house in the suburbs. Many people dream of building a home in the country with a range of features that they choose for themselves. VA Loans, in most cases, can’t be used to buy raw, unimproved land. This is because they are intended to purchase a priily will live in. There is an exception built in, however, for people who want to buy land and a custom-built home at the same time. If someone is buying a lot to build immediately and funds a construction loan simultaneously, they can qualify for a VA loan.
Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction
A VA loan can only be used for land if the borrower intends to build a home on the property right away. The loan, in this case, would be made for the purchase of the land and the construction of the home at the same time. Land cannot be purchased using a VA Loan if the plan is to construct later-the purchases must occur simultaneously. USDA loans, despite specializing in rural and suburban areas, have similar restrictions.
What about a buyer who sees a plot of land they can’t pass up but isn’t ready to start building a home to live in? These buyers can purchase the land using cash or a local loan. Then, when they are ready to build, they can use a VA Loan for construction on the plot that they already own.
Construction must be completed by a VA-approved builder. It will also have to pass a final inspection once it is complete. VA-Loan-funded construction must meet VA minimum property requirements. These requirements include:
- Enough living space for the borrower and their family to live, cook, and sleep.
- Clean drinking water and a working sewage system.
- Heating, cooling, electric, and other mechanical systems in working order.
- Heating systems capable of warming the interior to at least 50 degrees.
- A way to access the property by street or permanent easement.
- Durable property infrastructure.
The street access or easement is crucial for people who wish to use a loan to build on land they already own. An inaccessible lot will not qualify for a loan. Instead, look only for lots with existing street access or a permanent easement that allows access through another property.
Options if a VA Lender Won’t Offer a Construction Loan
Some borrowers may find that they are having trouble finding a VA lender willing to fund a construction loan. However, those who have found the location of their dreams still have options. VA Loans are not just for initial purchases; they can also refinance an existing home loan.
A veteran homebuyer interested in building a new construction home can get finance from a local bank. Then, once the home is built, they can refinance the loan on the VA loan program. The tool to do this is known as a VA Cash-Out refinance loan.
While there may be a few more hoops involved in buying land with a VA Loan, understanding the process and your options can make it possible. If you have your heart set on a specific unimproved plot or love the idea of custom construction, make sure you familiarize yourself with the details of the rules and work out what is necessary to stay in compliance. This way, you can get the home you want in a place 
you love, all with affordable interest rates and protections.