Posted: 12/24/2010 9:26:51 AM EDT
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I have the opportunity to purchase 20 acres of wooded land.
It has about 600 ft of road front access, a newer 500' well, electric to one part of it, and I believe a septic system. There is a old empty shack of a building on it, an old travel trailer and some random trash. Looking at a really good price, but trying to figure out how to buy it. Anyone ever buy large parcel of land, that you will not be building a house on for your residence? |
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Usually need much more down, vs a residence.
One of my brothers bought 25 acres on the Shore CHEAP- it had some ROW and utility issues. Cheap enough he didn't care if he got stuck with unbuildable land. He straightened the issues out (actually PROFITTED re utility co) and built. |
| When we bought ours we went through a land bank. It is basically a bank that loans money for ag use land. Ours was just pasture at the time, so it qualified. When we began building our house, the mortgage financing paid off that land loan and lumped it in with the house construction loan. Looking back, I probably should have subdivided out 1 acre for the house site and kept the rest of the land separate from the home loan. That way if we ever do get foreclosed on, at least we would still have a chunk of land. Hopefully we won't have to go down that road. |
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I bought a small house on 51 acres last year as my primary residence.
Had a heck of a time getting financing, as the banks viewed it as a land deal. Finally found a bank to underwrite it (after promising to transfer a substantial amount of banking with them), and still had to put down 30% plus pay a premium on the interest rate. If I had not found this deal, I would have ended up paying near 8% with a similar down payment. Don't know if this helps. Everything else being equal, land loans are a lot tougher than to get than most other real estate loans. |
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Check with a LOCAL bank, one that has a couple or no branches. Most local banks don't mind lending on local land. You'll probably have to put 25-30% down on it, and the interest rate will be in the neighborhood of 8% but if you get a good relationship going with them you'll never mind the higher interest rates.
Good luck, hope you can buy it! |
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I forgot to mention that some banks have a program where they hold mortgages in their in-house portfolio, so they are less concerned regarding the marketability of said mortgages. They then tack an extra 1/2% on the interest rate. I got a 15 year loan at 4.5% plus .5% for a total rate of 5%.
I was fortunate to have enough money from the sale of my old home, plus an inheritance, to bring to the table as a customer (and a decent credit rating with no other debt). But I still had to put down 30%, and this place had a freshly renovated house on it (whose value was minimal compared to the value of the land). This was through a chain bank, not a local one. As you shop around, you may wish to ask if they have such an in-house program. What sucks is that my bank of many years could not do anything for me. I went from a Pro-2A bank to an Anti-2A bank to get my place. I feel like I sold my soul. |
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You also might get a much better deal from a local credit union than a bank. Maintaining a certain balance and having the mortgage payment auto debit each month go a long way to making a lender feel comfortable.
I just got my new place on 40acres on a 30yr 4.5% fixed with very nice terms. |
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Anyone have experience with owner financing for land? It seems to be a pretty common option around where I live. It's how I bought my house. Financed $42,000 for 10 year 6% interest, and I put 10,ooo down. The lawyer charged the seller 300 iirc to write the contract up. Oh and the taxes are just paid out of my pocket. Up here in Franklin county, the taxes are super low. |
| Be careful with owner financing. There have been cases of the seller looking for the buyer to default and then take back the land. If you are looking for a loan, you need to look at a bank that does land lending. Alot of the bigger guys will not touch it. You may want to look at using a HELOC on your house to borrow with and use the moeny cover the land. |
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I formed a corporation and got a commercial loan. Could you elaborate? How, and why was this helpful? How does the risk profile change? What was the change in requirements? Thanks, -Slice I'm pretty sure a personal guarantee was part of obtaining a commercial loan. 
Now the advantage of the 'non-recourse clause' in most/many states 'home loans' has been lost and if your personal/biz finances go belly up, you can lose BIG time. Not a good idea in most circumstances. |
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if you have issues finding a loan, try farm credit etc they tend to be much more friendly to land loans And at MUCH higher rates. Farm Credit quoted me 8% @ 30 years, I ended up getting 5.25% @ 15 years elsewhere (but with significant searching and negotiations). But they ARE friendlier on land deals than your bank will be. |