Best Land Loans

Raw Land Loans

So you have found a block of land that would be perfect to build your dream home on, or maybe you just want to hold on to it as an investment. Now, you need to know what to do next. How can you take out land loans and what are the general requirements that will be asked of you? Well, as with almost anything in the money business, the rates and requirements will differ greatly depending on which financial institution you seek out for your loan. This article can act as a short guide on the usual requirements for loans for land, so of course you will still need to carefully read the contract, terms and conditions, and other documents that your provider gives you.

The first requirement that you will find on just about all land loans that are available at the moment is a deadline on how long you have before you must begin construction on your land. Generally, if you intend to start building within 12 months, then you may actually need a different type of loan, sometimes referred to as a construction loan, but the availability and terms of these loans vary greatly so that is just one more thing to ask your lender about or research online. For a regular land loan you will usually have somewhere between one to three years through which construction must begin on the land. Of course, once again, this time frame will vary from lender to lender depending on your negotiation.

There are also some other requirements which are very similar to any other type of loan. For example, most long term loans must be for a minimum of $20,000 and it is not uncommon for that minimum to be even higher than that. The standard term for land loans tends to be about 30 years at the moment, although this also varies between different financial institutions, and most will allow you to make extra payments so that you can pay off the loan at an earlier date. The opposite might also stand true if you have a solid credit history.

As you spend some time online researching all the available loans for land, you will most likely find that they are not so different to other types of loans that you may already be familiar with. You may even find that your current bank or other lender can offer you a good deal on a new loan so, as I mentioned earlier, all it takes is a little research and a few questions to the right people and you’ll be on your way.

My general golden rule when it comes to applying for any new land loan is that you should have a complete picture of your finances, so that you know what you can and cannot afford. Many great investors have had to turn down a great deal on a piece of land at one time or another due to the fact that it just wasn’t the right time to go for it. You have to remember that good deals will keep showing up, and that you don’t have to rush into anything if you are not certain that you can handle it at the time being. It’s better to pay off any previous land loans prior to applying for new ones instead of going all-in at once.

Land Equity Loans

If you are looking into the possibility of land loans, you could not have picked a better time. Because there are fewer buyers (after all there is a bit of a recession going on) lenders are working a lot harder to get your attention. There is something odd related to this apparent shift in power dynamics. You would think that land loans would be available at low rates if the lenders want your business but that is not necessarily the case.

You will soon discover, that land loans are being offered at a wide range of rates for the very simple reason that land often entails a large investment and the impact of even a small percentage point difference could potentially mean big bucks to the lender.  If you are considering applying for a land loan, bear this in mind. You are in the driver’s seat, so to speak, so it is worth your while to look around. Even with the variable rates, there are some great deals out there.

Look for a long-term fixed rate at the lowest possible cost. As just noted above, with something as big as land loans can be, a fraction of a percentage point can cost you a pretty penny. This is no time to be getting into short-term or variable rates. You don’t need the surprises either of these can give you.

One of the options worth considering is raw land loans. Just a refresher here – raw land loans are loans for land that is, well, raw. It has no structures on it and has not been developed. It does not even have utilities installed or roads. Lenders look at the value of the land, not your credit-worthiness.  The good news here is that once you start improving the raw land, the value can leap to new heights. Side note here, if you do decide to go this route, make sure that your plans for the land are acceptable to the regulatory bodies.  It helps if you have a plan drawn up for the land that takes the zoning regulations into consideration. Lenders can be skeptical about such purchases because there is the danger of the grand plans never coming to fruition.

Bridge loans are great when you are buying a new house because there is a gap sometimes between selling your current home and buying your new home. However, these are not all that applicable to buying land. Unless of course, if you are selling land, where purchasing the new land depends on selling the current land. But this is not often the case. If you are having a hard time selling your land, then you might consider land equity loans.