Getting a Loan for Land- How to Ensure That You Qualify

Overview

Getting a loan for residential or commercial property can be challenging. Getting a loan for land is even harder.

Here’s how to ensure that you qualify for a loan for land:

Keep in mind that this type of loan generally requires a higher down payment. Some loan lenders require a 50% down payment.

This loan will also have a higher interest rate. Many lenders treat raw unimproved land loans as commercial loans, so interest rates are higher.

It’s more difficult to obtain loans to finance such purchases. Land loans are viewed by the banks as much more risky. Repayment terms, how the interest is calculated and other lending terms will vary. You need to be prepared for the possibility that a loan for land may have a restricted payoff date of a few years. Unlike a traditional mortgage, where you have 30 years to repay the loan, getting a loan for land generally means that you have to pay it back in a few years.

Raw land with no plans for improvement for a while is tough to borrow against. Stands bought with immediate plans for construction are easiest on which to secure loans. Lenders regard the latter type of loans as less risky and are likely to finance them.

The type of loan you get depends on the property and your plans for the land and the timing of construction.

Before applying for a loan for land, make sure that you check your credit score. You are more likely to get approved if you have a good credit record.

As a borrower, you may be required to commit in writing a statement of intent.

You may also be required to provide additional collateral or personal guarantees.

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