Land Ownership Made Easy: Financing Options for Your Property Purchase
Buying a home is an exciting time, especially if you are a first-time buyer. But what if you have always dreamed of building a home from scratch? In this scenario, you would need to buy a plot of land first before even applying for permission to build. How easy is it to buy land? Can you just tack the land price onto a mortgage application when applying for money to build a home?
Buying a Plot of Land
When it comes to applying for finance to build a home from scratch, the process differs slightly to the process of borrowing to buy a home that is already built. For starters, the experienced realtors at EXIT Real Estate Consultants in DeRidder say that you will need to find land for sale and then apply for a land loan to fund the purchase. Unless, that is, you have the cash to pay for it outright.
A land loan works in a similar way to a standard mortgage but the application is more complicated and the criteria for eligibility is stricter. This means you will likely need an excellent credit score for approval, and you will usually require some kind of a down payment. Land loans carry more risk for the lender because there is nothing to act as collateral. Furthermore, the way in which the land is going to be used will have an impact on whether you are approved. You should also be aware that the interest rate for a land loan may be higher than it is for a standard mortgage.
If you already have a home, you may be able to use the equity in it as collateral to improve your chances of getting approved for finance. You are also likely to get a lower interest rate and more favorable terms if you apply for a home equity loan than you would for a land loan.
What to Consider When Searching for Land
When looking for land for sale, you should keep a few things in mind (especially in terms of how they could affect financing). Lenders like to know exactly what the land will be used for and whether there are any zoning restrictions that could affect this.
When you find a piece of land that you believe would be the perfect space for building your dream home, you need to make sure that the boundaries are clearly marked. The best way to do this is to hire a surveyor and get it all down in writing.
Check with your local planning department to find out what the land is zoned for and whether there are plans for it to be rezoned in the future. You should also check if there are any plans for development in the surrounding area that could affect the plot of land. For example, if there were plans for a new sewage facility in the near future, the value of the land could decrease significantly. On the other hand, a new school or park could increase the value.
Access to utilities is another thing that a lender will look at. Before approving your land loan application, especially if you are planning to build a house on the land, the lender will want to know that it has access to utilities such as water, electricity, and sewage and that it can be easily accessed by road.
To conclude, applying for finance for a land purchase is not as straightforward as applying for a mortgage. But if you have a down payment and an excellent credit score, you may be able to buy that plot of land sooner rather than later.