Not all Veterans want to live in the city or suburbs. Often buyers desire to live away from the busyness of the city and live out in the country. So finding a home with some land attached has a lot of appeal. Imagine buying a house where you can hunt, ride a four wheeler, or grow a garden. Therefore owning a home where neighbors aren’t right on top of you is appealing to many! Well, a lot of Veterans run into an issue with lenders stating a VA home loan acreage limit. Properties with excess land may be difficult to finance for several reasons, but it is possible with VA. Let’s discuss.
Common Issues on Homes with Land
To understand the solution, let’s first discuss the problems. Primarily properties with more than a few acres can be difficult to finance. Actually this is often the case with most loans. One hurdle includes lenders having limits on the number of acres allowed with the home. For instance, lenders may set the limit at 5 acres. But even lenders which allow additional acreage, there could be another problem.
In order to finance a home with excess acreage, there must be sales with similar land attached. So a home being purchased which has 20 acres may not be compared solely with sold homes that have 1 acre. These properties are not similar and more than likely would cause an appraisal value issue. On appraisals, this would be called a “line item adjustment”. Basically if all comparable sales do not have extra land like the one being purchased, the property is unique. Lenders do not like to lend on unique properties.
So it is best to research the market up-front with the realtor and your experienced VA lender. Determine if there are recent sales of homes with similar acres. The sales do not have to match exactly. But if there are similar sales, then that is where Veterans farm loans could finance that dream property. So contrary to belief, VA will lend on properties with more than 5 acres. There is technically not a VA home loan acreage limit. Check out a success story below!
VA Loan Approved With Over 5 Acres of Land
We recently received an appraisal on a property that included over 19 acres and a modular home. Initially the buyer had issues finding a VA lender willing to finance this property. After calling around, the buyer was referred to our team. So we discussed the property with the real estate agent. It was very important to ensure there should be recent sales of properties with similar acreage. The realtor assured us there were supporting sales and the buyer wanted to proceed with an appraisal. In the end, the VA appraisal supported the value, had similar comparable sales, and we approved the loan.
In the Southeast U.S., there are so many areas with acreage. Just around our offices we have lots of country living. For instance, one could live near the ocean and Wilmington in Pender County. Additionally Moore County offers many horse farms and some of the lowest property taxes. In NC and South Carolina particularly, there are endless possibilities!
VA Guideline for Farm Residences – VA Home Loan Acreage Limit
The actual VA guideline referencing homes with land, otherwise farm residences, is located in the VA Lenders Handbook-VA Pamphlet 26-7. Chapter 11: Appraisal requirements, Topic 12. Other property types and situations, section g. Farm Residences. The guidelines state:
Although VA does not make farm or other business loans, the law allows veterans to use their Loan Guaranty benefit to purchase a farm on which there is a farm residence. VA does not set a limit on the number of acres which the property may have.
The appraisal of properties with acreage should not present difficulties if a sufficient number of similar properties in the area, which may include improvements not typically considered residential (i.e. barns, sheds, corrals, stables, pastures), were recently sold primarily for residential use. For VA purposes, the valuation must not include livestock, crops, or farm equipment and supplies.
In any case, individual improvements not typically considered residential (i.e. barns, sheds, corrals, stables, pastures) will be valued at their fair market value on the basis of the use of the property for residential purposes only.
Are you running into an issue with lenders stating a VA home loan acreage limit? Call us! Also check out our other informative articles about obtaining a VA home loan. Our goal is to provide as much education as possible!
Country Homes Near Me
So country living sounds appealing to you? There are lots of ways to find the right piece of land. First, find a local Realtor experienced in properties with land. Relocating? Have your VA paperwork together. Learn about the area – What’s the weather?
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Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.