Types of Raw Land Loans

Video Transcript

"This is financial advisor Patrick Munro talking about types of loans for raw land. Raw land, or unimproved land is just that. It has land that has no services, as to say no water, no sewer, no electrical. Therefore there are no buildings lying on that land either. But there are types of loans that an individual can achieve for the purchase of that land. Primarily, the lender will require a significant down payment, more so than a principal residence or a home. A down payment can range as high as fifty percent. Sometimes that's cost prohibitive. So what an individual will do if they're purchasing the raw land is they'll go to the seller and they'll take what's called a land contract. That's in essence the holder of the land will become the bank and basically the purchaser will put down a minor amount of money in escrow that's comfortable for them and the purchaser and basically start making payments directly to the owner of the land, and therefore it's self financed in that situation. This is by far the most popular type of loan for raw land. A secondary type of loan would be a collateralized type of loan against other real estate whereby a lender would take a charge upon free and clear real estate in one location and take the funding and the risk and put it on the raw land in the form of a loan. This is financial advisor Patrick Munro talking about the types of loans for raw land."