Different Types of Land Loans
Are you thinking about purchasing land? Whether it’s for business or residential purposes, finding the right type of Land Loan is a huge financial decision. As a buyer, purchasing land can be a massive financial risk. Knowing the different types of land loans and finding which one is right for you is crucial.
1. Lender Land Loans: Credit Unions and Community banks are more likely to offer land loans than national banks because local institutions can assess the value of the land better. If you do not plan to develop the land, the required down payment could be 50%
2. USDA Rural Housing Site Loans: These loans are best if you plan to build your primary residence on the land. Section 523 is best if you want to build your home. Section 524 allows you to hire a contractor to build your home. Both loans are designed for low-to-moderate-income families.
3. SBA Loans: This loan is meant to be used if you’re planning to use the land for your business. SBA provides a loan for 40% of the purchase cost. The lender provides 50% of the purchase, you contribute 10% as a down payment. The interest rate on a 504 loan is based on current market rates
4. Home Equity Loan: This is best used if you already have a home with significant equity. There is no down payment required and can typically get a low-interest rate. Loan terms range from 5-30 years. Downside if you default on the loan, you could lose your home.
5. Seller Financing: Whoever is selling the land may be willing to offer owner or short-term financing. This requires a large down payment and high-interest rates. This is primarily if you cannot qualify for any other land loans
Before you get a loan, asses what you plan to do with that land to determine which land loan is right for you. Once that is determined, shop around to see which loan is financially right for you. Once you’ve been approved for a loan, give us a call! We’re happy to help you find the perfect piece of land. Call us at (740) 965-1208.
Sources:
https://www.bankrate.com/mortgages/what-property-buyers-should-know-about-land-loans/