How to Finance Florida Land
You can finance land purchases in Florida by obtaining a loan from a bank or a credit union. Interest rates for land loans are usually higher than rates on home loans since lender's view houses as better collateral than land. As with any loan, you must provide your lender with your financial information and meet the lender's underwriting criteria in order to obtain a loan. You can finance both improved land that has sewage and utility access, and raw land that has neither.
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Instructions
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Contact three or four lenders with branch locations in the part of Florida that contains the land you are interested in financing. Many Florida lenders only finance land in certain areas so do not assume that because a bank has a branch in Miami that you can obtain a loan from that bank to finance a piece of land in Orlando. You should also contact local Florida credit unions as well as banks because as non-profits, credit unions often charge lower interest rates than banks.
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Print out your last two months of bank statements. You normally need to make a down payment of at least 10 percent to finance a parcel of improved land but you may need a down payment of 30 percent or more to finance a raw land purchase. You must give your bank statements to your lender to prove that you have sufficient income to cover both the down payment and the closing costs.
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Submit a loan application with two or three of the lenders that quote the lowest interest rates for lot loans. You must provide each lender with your last two years of tax returns, your most recent payslip and your bank statements. You must consent for each lender to check your credit report and lenders normally only approve land loans if you have a credit score of at least 620 although some lenders require higher credit scores.
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Review the good faith estimates from each lender after having submitted your financial information. Agree on a purchase contract with the Florida land owner and then formalize your loan arrangement with the lender that offered the best overall terms. Remember to bring a cashier's check to closing to cover your down payment and closing costs.
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Tips & Warnings
If you build a primary residence on your plot of land, you can benefit from Florida's "save our homes" tax assessment policy. You have to pay property tax on an annual basis in Florida and tax assessments are based on your home's value. However, the "save our homes" provisions prevents the property tax appraiser by increasing your home's assessed value by more than 3 percent over the course of a single year. This means property taxes often lag behind actual real estate values during property booms.
Land loans in Florida and elsewhere often have maximum term times of 10 or 15 years which can lead to very high monthly payments. Some people get around this by taking out interest-only balloon loans. On these loans you pay no principal payments until the end of the loan term at which time you must repay the loan in full. If your land's value has risen, you can payoff the balloon by refinancing your loan but some people run into trouble if their land drops in value as they can neither refinance nor afford to repay the loan.
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