Purchasing Land – Part 1
When it comes to purchasing your own piece of property there are a few things that you need to know. Land purchases have a reputation for being cumbersome and time consuming, however, that is not always the case. In many instances it takes less time to close on a piece of land compared to a residential property. Of course there are extenuating circumstances on both ends of the spectrum. There are plenty of things that you can do prior to even making an offer on a property that will expedite the closing process. While many people may purchase numerous homes in their life, they many only purchase one or two tracts of land. Being familiar with the land purchasing process is key.
Loans: Obtaining a loan or a pre-approval letter is the first step that should be taken prior to seeing any property in person. Knowing what you can expect to put down, the term, interest rates, etc. are all aspects of purchasing land that effect every part of the negotiating and purchasing process. It’s what I call the limiting factor and it must be clearly defined what you are capable of doing prior to even scheduling a showing. Also take into consideration that obtaining a land loan is much different compared to, let’s say a residential loan. You can expect to put typically 20-30% down unlike residential which is 10% usually. The term also varies as most residential loans have a 30 year term, which isn’t the case often with land loans. Most banks may require surveys to determine the exact acreage (if there isn’t a recent plat on file). Appraisals are also common, as banks need to ensure that the contract price is in line with the current market.
There are also numerous types of loans that allow you to make land purchases. This of course depends on what the future use of the property will be. For example, if a property has a residence on it, you may be able to obtain a VA or a USDA loan, if you qualify. Each type of loan has their own requirements, restrictions, and strict parameters that must be followed. Seller financing is also available on some properties. This of course doesn’t involve a financial institution but the term, money that’s put down, as well as other aspects are negotiated between the buyer and seller with the help of their respective agents. The possibility of this happening is dependent on whether or not the seller is willing to finance their property.
As you can see, there are many ways to purchase land and I only mentioned a few common ones. The key is knowing what you can afford and then making a plan to go get what you want. The last thing to keep in mind is that some banks prefer not to loan on land purchases. The financial institutions that do assist with land loans typically have strict guidelines. Guidelines that we at Mossy Oak Properties are very familiar with.
If you are interested in taking the first step in finding your favorite place outdoors, then give me a call. Not only can I walk you through the entire land negotiation and closing process, but I can also help you navigate any channels necessary to obtaining a loan that’s applicable for your situation and needs.