How to Finance Land Purchases – Part 1

Land loans are a type of loan that allow individuals to purchase a piece of land for the purpose of construction, development, or investment. They are a popular form of financing for individuals looking to purchase a piece of land with the intention of building on it, as opposed to purchasing an existing structure. This article will provide an overview of how land loans work and the process for obtaining one.

The first step in obtaining a land loan is to find a lender who offers this type of financing. Most lenders will require an appraisal of the land in order to determine its value. In addition, borrowers should be prepared to provide financial information and documentation such as income and credit score. Many lenders also require a down payment of 10-20% of the purchase price.

Once the loan application is submitted and approved, the lender will typically require a surveyor to inspect the property in order to verify that it meets all of the requirements of the loan. This includes verifying the boundaries, land use, and zoning. The lender may also require additional documents such as title insurance and deed of trust.

Once the loan is finalized and the loan documents are signed, the borrower will typically be required to make a down payment. The down payment is typically a percentage of the purchase price and is due at closing. The remaining balance of the loan will then be disbursed to the seller in the form of cash or a check.

The loan terms typically vary depending on the lender, but most land loans feature a fixed-interest rate and a loan term of 15 to 30 years. The interest rate is typically higher than traditional mortgages and the loan may also require a balloon payment at the end of the loan term.

In addition to the loan payments, borrowers may also be required to pay monthly property taxes, insurance premiums, and other fees associated with the loan. These fees can add up quickly, so it’s important to consider the total cost of the loan before signing any documents.

Key Points:

• Land loans allow individuals to purchase land for the purpose of construction, development, or investment.
• Borrowers will need to provide financial information and documentation such as income and credit score in order to be approved for a land loan.
• A down payment of 10-20% of the purchase price is typically required.
• Most land loans feature a fixed-interest rate and a loan term of 15 to 30 years.
• Borrowers may also be required to pay monthly property taxes, insurance premiums, and other fees associated with the loan.

People Also Ask:

Q: How much does a land loan cost?
A: The cost of a land loan will vary depending on the lender and the loan terms. Generally, the interest rate is higher than traditional mortgages and the loan may also require a balloon payment at the end of the loan term.

Q: What documents are needed to apply for a land loan?
A: Documents typically needed to apply for a land loan include financial information and documentation such as income and credit score, title insurance, deed of trust, and a surveyor’s report verifying the property’s boundaries, land use, and zoning.

Q: Is a down payment required for a land loan?
A: Yes, most lenders will require a down payment of 10-20% of the purchase price for a land loan.

How Do Land Loans Work – Highest Rated?

0:00 Introduction
1:09 Pre-Approval
3:08 Conventional Loans
4:27 USDA Rural Housing Loans
11:52 Wrap Up

You’ve been waiting long enough! This is PART ONE talking about how to finance land. This episode focuses on on avenues you may be able to explore in order to borrow money for land with a home already on it. Discussions on raw land will take place in part two.

***NOTE: In the video, I had my figures reversed about value of a home vs value of land for USDA loans. The land may not exceed 30% of the total appraised property value for this type of loan. Stated differently, the home has to hold 69% or more of the value of the total property.***

To start your pre-approval process reach out to one of these two options

Anna Pitcock at Stockton Mortgage
https://stockton.com/anna-pitcock/

AgCredit
https://apply.farmcredit.net/LoanApplication/Apply?aca=087

Rural1st
https://apply.rural1st.com/#/loan-officers/emily.stamper%40rural1st

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USDA Rural Housing Loan Information:
https://www.usdaloans.com/program/property-eligibility/

More on Stockton’s Rural Hobby Farm Loan and other programs
https://stockton.com/loan-programs/

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Email: stephen@landandhomes.co
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