How to Finance a Land Purchase
There are several reasons why people buy land or empty lots. You may choose to build a home or commercial building. Then again, you may buy land for investment purposes and sell within a few years. Regardless of the reasons, getting a loan to finance a land purchase is tricky. Therefore, it’s best to familiarize yourself with the process before going to a bank.
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Instructions
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Determine your goals for the land purchase. Before a bank finances a land purchase, they want to know your plans. You may decide to build your dream home, rental units or a business on an empty lot.
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Expect to pay a higher interest rate. Since you’ll likely need an additional loan to finance an actual construction project, lenders view land purchases as risky. As a result, they charge higher interest rates for these loans.
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Choose the right location. If your plans are to construct a home or commercial building, do your research. Building on a remote lot is costly because you’ll need to hire professionals to run electrical, telephone, water and septic lines.
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Inspect the land. Before asking a bank to finance a land purchase, talk with a realtor or inspector and determine whether the land can support a home or building.
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Contact the local zoning office. If you plan to build a commercial building or home on the empty lot, contact the zoning office and check the zoning regulations.
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Apply for a loan. Once you’ve found the right location, had the land inspected and checked with the zoning office, it’s time to apply for a loan.
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