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Finance

How to Finance Land

Financing an unused parcel of land is very different from obtaining a home mortgage, an auto loan, or even a personal loan. The lender is going to want more details and you are going to have to do some leg work to make this loan possible. However, if you need to know how to finance land so that you can build a dream home, have your own personal land to hunt on, or anything else you can think of, this article will help you along in the process.

Determine Land Use

land green road

You probably already have an idea in mind for your land or else you wouldn’t be thinking of buying it. However, most banks want concrete plans in order to finance the land. If you want to build a house, they want to know that you’ve already spoken to an architect or a general contractor.

Find the Right Parcel

land dirt sky

Everyone’s needs for a piece of land will be different. If you are planning on building a house on the property, you may want a home that already has access to certain utilities or has great views. If you are wanting to hunt on the property you may want a parcel that isn’t clear cut yet. Whatever your needs, you want to make sure the land fits those needs.

Know the Details

land overhead view

Every parcel is going to come with different inclusions. Some land purchases include access, and perhaps even hookups to certain utilities. Some may include access to roads if you provide your own driveway. Some already have land surveys completed so you don’t have to do this. Find out what will be included in your purchase.

Look for Potential Lenders

calculator pen writing math

Not all lenders will finance a parcel of land that doesn’t have a home on it. Find lenders that do. Then approach them with your plans as well as the parcel you are interested in. Find out what terms they are offering. Compile all of this information so you can see a bigger picture of the choices you have.

Choose the Right Lender

man calculating notebook

It is important to choose the loan with the best terms for your situation. You may decide to have larger payments over a shorter period of time or smaller payments over a longer period of time. You also have to look at the interest rates being offered as well as closing costs.

Finalize the Loan and Use the Land!

land shovel dirt

It may take some time to get a closing date and receive the final paperwork on your loan so you can start using the land for whatever purposes you and the bank agreed on; however, once all of the paperwork is signed, you can get to work and start enjoying your new parcel of land.

As mentioned, buying a piece of land is not the same as buying a home or even a car. Not all banks will agree to finance land with nothing on it and those that do may offer different terms on it compared to what they would offer on a home. Be prepared to answer more questions and provide more information. However, you will be happy you spent the time to do so once you have access to your own land.

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