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Can An Eligible Veteran Build on Their Own Lot or Buy Land with a VA loan? 

July 3, 2023

If you are interested in purchasing a piece of land and financing it through a VA-approved lender, there are several loan options available for you. While a standalone VA land loan is not offered, the VA loan program does allow for the purchase of land when combined with the construction costs to build a new home. This loan product is known as a VA One-Time Close construction to permanent loan. It is a convenient loan option that includes the cost of the land plus the cost of the construction and even allows any VA funding fee to be financed into the loan. This Zero out-of-pocket financing allows eligible Veterans to have a true $0 down loan.  

To utilize the VA loan for buying land and constructing a new home, there are certain guidelines to follow. According to VA regulations, the borrower must be purchasing the land at the time of closing the construction loan or must have owned the land for six months or less from the date of case number assignment.

When considering a land purchase as part of a VA mortgage, it’s essential to be cautious and mindful of certain factors. Always inspect the land thoroughly before making any purchase, just as you would with a home. Assess the reputation of the land developer in the local area and seek recommendations from others, including your VA-approved lender or real estate agent.

The VA One-Time Close loan offers numerous advantages, such as the option to avoid making payments during the construction phase and the convenience of not having to re-qualify after the home is built. The best part is that even borrowers with credit scores as low as 620 can be eligible, making it an attractive option in the current housing market. Once the loan is finalized, borrowers can customize it to secure a lower interest rate or maintain their rate regardless of market fluctuations.

Nevertheless, finding a knowledgeable mortgage lender for VA construction loan financing may prove challenging. Many VA lenders focus on typical VA home purchases, cash-out refinances, and streamline refinances. However, a few select companies across the country have loan officers who excel in these types of transactions and offer exceptional service throughout the process.

It’s essential for veteran borrowers to be aware that while the VA has established housing regulations and guidelines (known as VA Pamphlet 26-7, Lenders Handbook), lenders might impose additional overlays or requirements. The VA guidelines provide a baseline for VA-approved lenders, but some lenders may have more stringent criteria. For example, though the VA allows the One-Time Close construction loan product to apply to various property types, many lenders may demand that the property be an owner-occupied single-family dwelling and might set higher minimum credit score requirements than the VA guidelines.

If you’re contemplating constructing a new home in your state, it’s worth exploring the option of a VA One-Time Close Construction Loan.

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHAVA and USDA Mortgages.  These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by (one) licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.

OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allow for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.

In addition, this is a partial list of the following homes/building styles that are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.

Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with (one) mortgage construction lender licensed in your area to contact you. Your credit report will NOT be pulled due to sending this and we do not ask for Social Security numbers.

  1. Send your first and last name, e-mail address, and contact telephone number.
  2. Tell us the city and state of the proposed property.
  3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $1,000,000 and review higher loan amounts on a case by case basis.   If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

Or you can go to our site and Request Additional Information.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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