Financing in Virginia>Question Details

Mohammad Ali…, Real Estate Pro in Woodbridge, VA

DTI requirement for land purshase financing

Asked by Mohammad Ali Hashmi, Woodbridge, VA Mon Sep 23, 2013

HI, I am looking to buy a 100k land n Virginia to build a vacation home on it.I have 25% down for it and need a loan for the rest. what is the max DTI required for this type of purchase?

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Hi Mohammad,

Since land loans are not eligible for sale to Fannie Mae or Freddie Mac. i.e. not eligible for conventional financing, each individual bank is free to set their own guidelines. So there is not really a guideline per se, or an "industry standard".

With that being said, most lenders I know of who offer lot loans require a 40% DTI or less. I would doubt you'll be able to find anyone willing to lend above 45%. If you plan on building a home, you will probably need to have an even lower DTI than that if you also wish to finance the construction of your new home. Most lot loans are going to be a 2 year or 5 year balloon loan, meaning you are going to have to begin building sooner rather than later.

These are all things to consider if you want to have the home custom built as opposed to building in an existing subdivision. Best of luck to you!
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