McClintick Real Estate, Inc.



Posted by McClintick Real Estate, Inc. on 3/12/2020

Image by Peggy und Marco Lachmann-Anke from Pixabay

You’ve decided it’s time to build the dream house you’ve always wanted. An exciting time!

Prior to hiring builders to construct your home, it’s critical to understand the financials involved before you start the planning process. Securing funding for land is different than obtaining a traditional home mortgage. For starters, there are typically fewer loan options. If you’re looking to buy land to build your new home, here is a rundown of several common funding options.

Cash

If you have the cash to cover the full purchase price of the land, this might be your best bet because you’ll be debt-free. Many mortgage lenders often waive large down payments to build houses because the borrower establishes equity in their new home by buying the land outright.

A word of warning—be careful about wiping out your savings because you’ll need money as unexpected circumstances arise during the build process—always have a financial contingency plan.

Land or Lot Loans

Land loans are available for raw, undeveloped land, and is a great alternative to avoid cleaning out your bank account. The big drawback is interest rates will be higher. Lot loans are very similar to land loans, with the primary difference being the land has building permits, surveys, and/or utilities already in place. Like a land loan, a lot loan typically comes with higher rates.

Seller Financing

Land is often difficult to sell and, to get the ball moving, some sellers are willing to lend buyers the money needed to get their build started. These loans are usually short-term and come with high-interest rates.

Construction Loans

These short-term, high-interest loans are designed to help you get your project started. To be approved, you’ll need to have a budget and construction plan in place. Once your project is completed, you can often convert a construction loan to a traditional mortgage.

Home Equity Loans

If you already own property, you can explore taking out a home equity loan to cover the cost of your new land. These loans are easier to acquire, along with longer terms, better interest rates and no down payments. The big drawback is if you default on payments, you risk losing your existing home.

Borrow from Local Financial Institutions

Local lending agencies are more likely to approve a land loan than other financial institutions that aren’t vested in the community. You might do well by identifying community banks and credit unions who are familiar with the land, along with its worth and potential.

In general, lenders command higher interest rates and bigger down payments with land-related loans because they deem land purchases to be far riskier than lending money to people to buy an existing home. The reason being they perceive owners as not yet fully invested in the property until a house is on it.

Choosing the right property and finding a way to fund the purchase is the first step. Once you’ve got these two boxes ticked off your to-do list, you’ll have taken one big step towards the day you’ll be able to move into your dream home.




Tags: Land   Financing   buying land   Building  
Categories: Uncategorized  


Posted by McClintick Real Estate, Inc. on 4/30/2015

Some may think that buying a piece of land is a very complicated process. As true as that may seem, it is not as complicated as you would think and can be cheaper than buying a home. Finding a piece of land in the right location at an affordable price is possible, especially in rural areas.  More populated areas may prove to be a bit more of a challenge. The following tips will help improve your land buying experience. Start With The End In Mind In order to make the right choice, you need to have in mind what you want to do with the property and in what time frame. There are several reasons people buy a piece of land, some want to build a home on it, others want to farm, while others buy land as a future resale investment . Whatever your reason may be, you need to decide before purchasing as your reason influences your choice. Save Towards It Make sure you have enough money for the down payment if you are purchasing with a loan. Some lenders might ask for up to 50% down payment, others are comfortable with 20%. Alternatively, you can opt for an equity or construction loan. Make A Decision On The Location This is a very tough decision to make as buying land is a huge investment. If you are already familiar with the neighborhood, your decision should be easier. If the area is entirely new to you, you’ll need to do some research both offline and online before making a decision. This website is a great place to start your online research and reach out to a real estate professional. Visit The Property If you have not seen the property, now is the time to do so.  Visit the property with your real estate professional and see it for yourself. Look around and see what appeals to you. Does the neighborhood appeal to you? Is it easily accessible? Will it meet your needs? Talk to neighbors, ask questions about the history of the property, you will be amazed at your findings. Make An offer At this stage, you should be comfortable making an offer through your real estate professional. Offer a reasonable price that would not be considered an insult. With a lower offer, you and your agent will have more bargaining leverage if the seller counteroffers. When negotiating, do not appear desperate, always display a healthy measure of confidence and be willing to walk away. Final Checks When you agree on a price,  an attorney will review the documents before you sign. This is necessary to ensure all details of the land purchase are included. Owning a piece of land can be a great investment as its value generally increases over time.  Finding a great piece of land in the prefect neighborhood is becoming increasingly more difficult. Call a real estate professional today to get started on your search.  




Categories: Purchasing Land