Buying land allows you to build the home of your dreams or preserve a slice of nature. However, land can be expensive, so you may need a loan to fund your land purchase. Although you might assume that land is a safe investment-after all, “they’re not making any more of it”-lenders see land loans as risky. ? ? ? ? As a result, the approval process can be more cumbersome than standard home loans.
- Land that you intend to build on soon
- Raw land that you don’t expect to develop
Land loans can be relatively short term loans, lasting two to five years before the balloon payment is due. However, longer-term loans exist (or you can convert to a long-term loan), especially if you’re building a residential home on the property. ? ?
Key Takeaways
- Lenders are often most willing to lend if you buy a finished lot or plan to build on the land you buy, because that adds value to the property.
- Local banks, credit unions, or a second mortgage on your home are good sources of funding you could try this out if you are not planning to build on the land you buy.
- Other sources of funding include commercial lenders, specialized lenders, or financing from the current owner.
- You will need to get a survey of the land, check the title, and budget for additional costs such as taxes, insurance, building costs, and permits.
Buy and Build in One Step
Lenders may be most willing to lend when you’ve got plans to build on your property. Holding raw land is speculative.