After years of trying unsuccessfully to list my home on my own, I finally realized that I needed some serious help. I began looking for a great real estate agent who could help me out, and after interviewing a few professionals I found someone that was really in tune with what I needed. They sat down with me to talk about my needs and worked hard to help me to identify different homes that could work for my family. I wanted to make a blog all about selecting the perfect agent to work with during your house hunt. Check out this blog for great tips on choosing agents.
When mortgage lenders and banks review any loan application, the potential risk involved in granting a mortgage to the applicant is often the determining factor for whether it will ultimately be approved or denied. Since raw land loans are considered to be some of the most risky of all, mortgage lenders will require even more conservative lending terms to help offset some of this risk. If you are preparing to apply for a mortgage for the purpose of buying land, the following information can help you succeed in getting the approval you need.
Expect to make a hefty down payment
While home loans are still available with very attractive interest rates, including some that require no down payment at all, most land mortgages will require a significant down payment, depending on the type of land being purchased. On raw land, lenders may require as much as half of the purchase price to be put down in order to consider making the loan, depending on the lender and the buyer's credit history.
Consider using equity in another property to offset the down payment
If making a large down payment is not possible for you to do, it may be possible to use equity in your home or another property instead. If the other property is your home, refinancing it to cash out your equity can provide the funds you need to put down on a raw land purchase. Homeowners who have or can obtain a home equity line of credit on their residence can also choose to use those funds for a down payment on a raw land purchase.
If the equity you have is in one or more other parcels of land, lenders may consider doing a blanket loan so that the properties you already own, as well as the one you plan to purchase, are used as collateral for the debt. Remember, however, that taking on this additional debt can change your debt-to-income (DTI) ratio and may have a negative impact on how the mortgage lender views your loan application.
Consider asking the property owner to provide seller financing
Borrowers who expect to have trouble getting a raw land loan that they can afford may want to bypass traditional lending sources and seek out alternative financing options, such as seller financing. Since raw, unimproved land is often in lower demand among buyers and can take longer to sell, property owners may be willing to provide seller financing with attractive terms in order to make the sale.
To learn more about purchasing raw land, prospective property buyers should work closely with a real estate professional who specializes in land sales.