Learn about the opportunities and limitations with using your VA loan benefit to buy a farm residence.
Most Veterans and military personnel are aware of the opportunity to use a VA loan to purchase a home with no down payment, competitive interest rates and flexible financial requirements. However, if you're a Veteran looking for a loan to purchase a farm, you may be wondering if you can use your VA loan benefits.
The VA allows eligible individuals to purchase a farm using a VA loan as long as there is a home on the property they’ll be using as their primary residence. You cannot use a VA loan for a farm solely meant for commercial purposes. Lenders can have their own guidelines and restrictions and might not allow buyers to purchase working farms.
VA farm loans follow most of the standard financial requirements (such as your debt-to-income ratio) and meet VA appraisal guidelines.
Here’s what you need to know:
The VA loan program is designed to help eligible active military personnel, Veterans and surviving spouses purchase their primary residence. For this reason, VA farm loans require the property to have a primary residence on it.
This means the property cannot be primarily used for business or commercial purposes. Some lenders, including Veterans United, do not make loans for working farms.
Veterans might also be able to obtain a VA construction loan to build a farm residence. While this complicates the process a bit, it is another option that you may want to explore.
The VA appraisal can be a make-or-break component when it comes to purchasing a farm residence.
Farms often have other structures on the property in addition to the primary home. This may include barns, silos, stables and more. The VA doesn't allow loans to cover nonresidential value of farm land beyond the home site, outbuildings necessary for farm operations, farming equipment or livestock.
VA loans don't have a limit on the number of acres the property can have. But trying to purchase a large tract can be tough unless there are good recent comparable home sales for the appraiser to use.
Lenders might also require the appraisal to indicate the property's highest and best use is residential.
Like with other forms of self-employment, Veterans who've earned income from farming or ranching operations (and claim it on their taxes) may be able to use that income to help qualify for the new loan.
But trying to use the income you expect to make from the new property can be a different story. The VA allows lenders to use prospective income in cases like this, but not all lenders will do so.
Otherwise, buying a farm residence looks the same as any other in terms of guidelines like debt-to-income ratio, residual income and more. Generally, lenders want to make sure you have stable, reliable income that's likely to continue.
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Veterans United does not make loans to purchase working farms. The VA appraisal must show that the highest and best use of the property is residential in nature.
Veterans may be able to purchase a hobby farm, as long as there aren't marketability and market value concerns from an appraisal and underwriting perspective. Prospective income generated from the hobby farm can't be counted toward qualifying for the new loan.
We will also need there to be at least one good recent comparable home sale for the appraisal. Unique properties are evaluated on a case-by-case basis.
If you’re still exploring your options, it’s important to know there are many different types of properties you can purchase using a VA loan. In addition to single-family homes, some popular options include:
If you've been dreaming of living on a farm, a VA farm residence loan could help make your dreams come true. To learn more about your options, call 800-884-5560 to speak to one of Veteran United's loan specialists today.
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