Best Land Loans

Raw and Unimproved Land Loans

First things first – land loans have higher interest rates than most of the other traditional loans and there is a good reason for it. If you get a loan in order to buy a house, then you will in turn use that same house as collateral. But can you do the same with a piece of land? No. The most difficult land to get a loan for is raw land, which has no plans on being used to build anything. These types of loans are even more expensive to the borrower, such as farm loans. Again, think of it in terms of collateral. If the lender is left with an unpaid farm loan, and in return, only gets some acres of unimproved farm land, you can safely assume that he won’t have much to make up for his loss. As a general rule, all lenders want to have something to lean back on just in case the borrower bails out on them.

Thus, it goes without saying, that when choosing a land loan, there are many factors one should look at to ensure they are picking the best possible loan. The type of loan you need really comes down to the type of property and what you will be doing with the property. Many lenders may require up to a 50 percent down payment, but if you do your research, you might be able to find kinder ones that will settle for a 20-25 percent down payment. Obviously, you will be able to get better land loan rates when borrowing from someone based in your area that will already have a general idea of the potential development growth of your land.

Getting land purchase loans, especially for unimproved land, is not easy – you can go as far as to compare it to having a bad driving record and trying to get auto insurance. Then again, if you have plans to develop the land, land loan lenders will probably give you a loan with less hesitation because they know that they will most likely be paid back sooner.

It should be obvious by now, that there are a number of different land loans that one can apply for. Even though the economy is not at its greatest, many people are still using these times to thrive above others. It is never recommended to take a loan though, and that is a known fact – because you are borrowing. In other words, you are using money that is not readily available to you and might never be. But obviously, most people do not have the money to go out and buy acres of land. Most people need a loan, and that’s ok, as long as you have a stable plan to pay back the lender. In that case, browse through the various land loan lenders and make your pick!

Choose Carefully!

There are many different types of land loans available to investors and this article is going to examine each one individually to facilitate your decision on which one to pursue.
First there are vacant land loans. These are designed specifically for the need of purchasing land that is currently undeveloped.  In this case, even though the property is undeveloped, plans for development can be made since utility lines should be fairly easy to establish.

Secondly there are improved land loans. These are loans designed for land that has been partially improved and is in some kind of construction process. Improved property loans are sure to be much more preferable to lenders than any other type since they can be much more confident that development will take place in this land so their risk of not recouping the loan plus the accrued interest rate is much lower. Such improvements can include already established access to lines of utility, finished or even partially constructed structures or connection to a road network.

The next type of loans we will consider is raw land loans. These are loans designed specifically for land that has no trace of improvements at all. This means for example that there are no present utility lines like water or electricity, or furthermore that access to them is difficult. This type of loan is much harder to secure than the rest as the purchaser has a much lower stake than in other cases as the land is completely undeveloped. This on the other hand increases the risk for the lender which in turn means that he will probably require a higher down-payment and request much more information about plans for development such as access to utilities or building plans.

Even though it is not a type of land loan, it would be wise to include construction loans in this article. This is due to the fact that it will be in most cases associated with the above types of loans if the land is destined for any kind of development. This type of loan may not make sense for someone who has bought land with no plans for commercial development or for personal use but it most certainly does make sense if someone intends for example to build a lot of residential structures on his land. The way to secure such a loan is to provide adequate information about the type of construction you are planning to do.  Every type of loan above can be used in order to acquire property for residential or any other kind of commercial development. If that’s the case, then a construction loan is the way to go but always bear in mind that adequate information about your plans must be presented in order to secure one.