Land Loans Overview
What is a Land Loan?
There are many types of land loans available. They are different from existing home loans. The terms of the loan can be determined by the current purpose and use of the land.
Raw Land Loan
It is often the most difficult to finance unimproved land or obtain favorable terms. Raw land is considered the most undesirable collateral by lenders for all land uses. Many lenders will require more money down (up to 50%) and charge a higher interest rate.
The Lenders For Lot-Land
Local lenders, as well as some national lenders, can usually provide lot loans. A lot loan usually consists of several building sites for residential construction. These lots often have sewer and water systems installed and streets and easy access to utilities. Lot loans typically require 10-20% down and amortization terms of up to 20 years. These lots can also be financed with home equity or cash-out refinances on the borrower's current residence.
There Are Many Factors To Consider When Purchasing Land
When shopping for a site, there are many things you should take into consideration. These are:
Access - To access a public road, the lot must have access to it or a permanent easement.
Improvements and utilities - Do you have streetlights, streetlights, and paved roads? These amenities will become a cost for future development if they are not included in the sale of your lot. You will need to pay for a private well and septic system if there is no water or sewer available.
Land use restrictions and Zoning - Are you able to use the land as intended? Are the restrictions and covenants on the lot limiting the size of the lot to build your dream home? Are there homeowners associations? What association restrictions, and how much are your dues?
Future plans - Ask the local planning department about future sites that could affect your property's future value. They might be able to show you future locations for schools or parks, as well as proposed new highways and garbage dumps.
Boundaries Usually, you will need to obtain a stake survey in order to mark the corners on your lot. It is important to understand what your site includes, especially if you have irregular acreage. Most lenders require a boundary survey.
