Making an Offer on a Plot of Land

Getting a Land Mortgage

As mentioned earlier, experts often recommending purchasing land with cash. But if you don’t have enough savings to purchase the piece of land outright, you can get what’s called a land loan.

The kind of land loan

you’ll need will depend on the type of land you’re interested in buying. There’s financing available for raw land as well as improved land that has already seen some development (by installing sewage lines, for example).

Raw land loans can be challenging to obtain. Developing raw land is expensive and difficult, so raw land loans are considered to be riskier than loans for improved land. You’ll often find these loans classified as commercial property loans. If you need one, you might have to make as much as a 50% down payment. Still, there are some lenders who let buyers put just 20% down.

Anyone who needs a raw land mortgage should be prepared to pay a high interest rate. In addition to looking at your credit and your background, your lender might want to see details about what you intend to do with the land. Your chances of getting approved for an improved property loan are significantly higher.

If you can’t obtain a land loan from a bank or other lender, you can see whether the owner of the land will offer you financial assistance. Or you can try to apply for a Section 502 direct loan, part of a program administered by the Department of Agriculture. It gives low-income individuals the option of buying land in a rural area and using it to build a house.

A land loan isn’t the only form of financing you’ll need. You will also likely need a construction loan in order to build your home.

Making an offer on land isn’t that different than making an offer on a home. When you’re ready to purchase a piece of land, you’ll have to make a written offer. You’ll approach the seller with the terms you’re willing to abide by. You should also include all of the details related to the transaction.

After you make your initial offer, don’t forget that you can negotiate the land price down. It’s best to come prepared with research and data, though, to back up whatever price you’re willing to pay. You can even ask the seller to pay some of your closing costs and include contingencies. These include a clause that states you can walk away from the deal if the land fails to pass inspection.

In order to claim a portion of land as your own, you’ll need to officially close on the land purchase. To do so, you’ll have to sign a land purchase agreement. This agreement will specify how much you’re paying for the land and how much money you’re putting down. The seller will have to easy installment loans Minnesota sign the agreement as well.

The land contract you’ll sign will include everything that you and the seller agree to regarding the land purchase. Other documents you’ll have to review include state-based real estate forms, a closing statement that highlights all of the costs that stem from the sale and a deed that transfers the land’s title from the owner to you.

Bottom Line

Buying a piece of land isn’t simple. It’s important to do your due diligence and check with specialists and experts. This is to ensure you’re complying with local zoning guidelines and real estate laws. Complete all of the necessary steps and you can buy the land you need for the home you’ve always wanted.

One important step to take before finding a lender is to have the land surveyed by a professional. This involves hiring someone to look at how accessible the land is, figure out its dimensions and find out whether anyone already has the right to use the property.