How to Acquire a Loan For Land
The process of finding land--and acquiring a loan to pay for it--is often more difficult than individuals realize. In addition to finding a parcel of land that suits their needs and budget, buyers must also consider a variety of building and zoning issues to ensure that the land can be used for the home or business that they have in mind. Another big consideration is securing financing to pay for the land, since many large banking institutions won't lend money for land purchases.
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Do your homework prior to purchasing a parcel of land by finding out about any land-use restrictions and zoning regulations that might limit your ability to build on the land. Also important are factors that will make the property undesirable in 10 or 20 years, such as the planned construction of an interstate highway in your home's backyard. All of this information can be found by visiting the town's planning and zoning department.
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Come up with at least a 20 percent down payment to pay for the land. If you own a home already, consider taking out a home equity loan to secure the necessary funds. An advantage of home equity loans is that they are tax deductible.
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Speak to the land seller directly regarding financing for the land. Unlike traditional home mortgages, loans for purchasing land are often negotiated directly between the buyer and seller, who will come to an agreement regarding the terms of the loan. Another option is to speak to a local community bank. Unlike large banking institutions, small banks are often more open to giving loans for land--especially if they know that you'll be coming back for a construction loan in a few months.
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Take out a 90-day loan for the land if you are planning to begin building on the land within the next few months. This will allow you to roll the loan balance into the loan for the home construction.
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