How to Finance Vacant Land or Lots and What to Consider
Financing lots or vacant land can be a little more complicated than just a home. There is not much actual property other than dirt to finance. Financing for a house is easy, approving a loan for vacant land is a bit more risky.
Since the collateral of the loan is raw land, (land not being used at that moment), if approved you might leave at any moment. This would put the responsibility of the land on the shoulders of the lender. There will be a number of tests when you are looking to qualify for a loan, for this reason.
When you are looking for vacant land loans, know that vacant land financing is much more of a local bank arena than the big national banks. Local banks have a better feel for your area and are much more likely to grant loans to finance vacant land.
Start with Land Analysis
An appraiser would view the parcel of land you have chosen for your home building project with the following items:
- Legal Descriptions of the land
To identify individual parcels, appraisers use legal descriptions, surveys, and other descriptive information usually found in public records at the Chelan county courthouse.
- Physical Characteristics of Land
An appraiser must describe and interpret how the characteristics of the land influence its value. These characteristics include site size, utilities, topography, accessibility, the environment surrounding the parcel.
Before checking out the land itself, appraisers would research current owner information such and deeds and trust documents. Additional support information can be found in land data banks and assessor maps.
This informs owners in Chelan county exactly what type of properties can be built (residential, commercial, or industrial properties). Zoning requirement control things such as the height of buildings, the size of buildings, building setbacks, plan lines for future street widening, and open space requirements just to name a few. Land use restrictions will let you know if you can build the house of your dreams on a particular lot.
- Assessment and Tax Information
The records of the tax office can uncover details about the assessed value, the annual tax burden of the land, and how Chelan assesses property.
Qualifying for a loan
Local banks will decide whether to lend you money based on the qualification criteria set up by each lender. However, no matter what bank, there are certain things your financer will always ask.
Here are some ideas on what financers will need when finding vacant land financing
•Your ability to repay the loan
This is of course the most obvious thing that bankers look for when they are approving or denying a loan to you. Lenders will look at your credit history, your tax returns, collateral assets you own, and if you are building your personal residence as opposed to a speculative investment.
•What is the land worth?
The lender look into the value of the property you are buying. This will depend on the purpose for which you want to use the land. The lender will also want to know the appraisal value and the purchase price of the land.
The lender will typically offer you a loan to value ratio of 60-80 percent. So, you should expect to pay around 20 to 40 percent as down payment for a loan. The amount you pay as down payment will depend on things such as the location of the land and if there are other items included in the loan.
For more information on financing Beebe Ranch lots and land or to get in touch with a local lender, please don't hesitate to contact our offices today.