Land Loan: The Fundamentals
A land loan is also known as a lot loan. Land loans have been tailored as purchase money loans for the borrowers who are not prepared to start construction now and are not prepared to secure a construction loan, however would be prepared in the near future.
The lot or land should be standard for the neighborhood and one utility should be available as a minimum from the road. Propane tanks, septic tanks are satisfactory if these attributes are standard for the area/locality.
Similar to hard money loans and construction loans, a land loan can be financed both as a stated income (reduced doc) loan and an Alternate or Full Doc Loan. There are various types of land loans like commercial land loans, vacant land loans, hard money land loans, raw land loans and so on.
Raw land is also known as unimproved land where there are no plans for development. You would face maximum difficulties in getting a raw land loan since it is basically a financially insecure investment. Raw land has no additional features such as utilities, septic tanks, structures or roads. Lenders would ask for a higher down payment and interest rate for a land loan in comparison to a developed property loan. Some would ask for a down payment of 50%, however, there are lenders who would just necessitate a down payment of 20%.
Lenders consider land loans to be more risky since the security of the loan or the property is not presently in use. This makes it simpler for the owner to walk off and leave behind the land for the lender. As a result of this, interest rates and down payments for land loans are higher in comparison to that of mortgage loans.
What form of loan is contingent on the property to a great extent, what you intend to do with it and when you intend to have the project finished.
Similar to home equity loans, land loans are usually offered with repayment terms of 10-15 years.
Filling out an application for a land loan is quite simple. The entire application procedure is safe and secure. There is no necessity to furnish your Social Security Number (SSN). You can complete the application within just 2-3 minutes. You would be offered tools to carry out your negotiations pending the closing of your loan.
For obtaining the most reasonable rates and terms on a land loan, you have to shop around. When you send your loan application online, more than 10,000, brokers, banks and private investors can immediately access your application. In case your loan application suits their lending conditions, they can instantly furnish you with a “Letter of Interest” as well as a loan sanction. You might get 4-6 bids. You would get the information through e-mail.
To get the best possible deal on a land loan, you should compare loan offers and subsequently select the one that is most suitable for you or negotiate more.
Types of Land Loans
Usually, land loans can be categorized into the following types:
- Commercial land loans
- Construction land loans
- Bad credit land loans
- Land development loans
- Farm land loans
- Land equity loans
- Lot land loans
- Land purchase loans
- Mobile home land loans
- Vacant land loans
- Raw land loans
- VA land loans
- Hard money land loans
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