Land lot loans are different from mortgages and other types of financing. Companies like Lending Tree and Quicken cannot help you find this kind of loan.
The bank that you normally deal with may not offer a suitable option. They might suggest a bridge loan or cashing in on the equity present in your primary residence.
Credit unions are sometimes easier to deal with. But, the interest rates and required down payments might be higher than you had expected.
Some lenders will loan only 50% of the land’s value, which means that you would have to come up with the rest. On the other hand, there are some lenders willing to finance 90% of the selling price. With that kind of disparity, it is particularly important to shop around for the best deal.
Shopping around on your own can be a time-consuming thing. A better option would be to talk to a broker. Some brokers specialize in just this kind of “niche” market. They don’t handle mortgages or other deals popular with the banks.
Because they serve a more focused area of finance, they can tell you what programs are currently being offered for land lot loans. That will save you time and money. There are some lenders that only go through brokers. So, even finding out what programs they offer would be impossible, without the help of a broker.
Typically, when individuals buy a residence or a vacation home, the house is already built. All they need is a mortgage. It may be harder to get financing for a vacation home, than it is for a primary residence, but it is still easier than getting bare land lot loans. Banks just think the bare lots are too risky.
Your planned use for the property has something to do with the availability of financing programs. Certain programs are designed for working farms. Others are designed for hunting property. Most are for people that are planning to build, at some point in the future. So, when you call a broker, he or she will ask about what you plan to do with the property.
If you are interested in building a business, in other words, if the property is for commercial use, there are different options available. Typically, your best choice would be to deal with the bank with which your company has a line of credit. You may qualify for an SBA guaranteed loan.
The number of lenders making land lot loans has decreases significantly over the last several years. But, they are not all gone. There are more choices when the property is to be used for residential purposes. Fewer options are available for recreational and agricultural properties.
If you do decide to shop around on your own, be wary of balloon payments. Lenders create balloon payments with the idea that you will be able to obtain a conventional mortgage or a construction loan, once the building begins. Even the best plans are subject to change.
You are safer with long term land lot loans and they are available. No matter what your banker might say.
