What is a home loan and how do I get one?
Are there other ways to finance a purchase of land?
If you are unsure about getting a land loan or construction loan for your construction or development project, there are also other ways to finance land, including:
Seller financing occurs when the buyer and seller of a property make the terms of the sale on their own without a bank or other financial institution being involved. This can be a great option for borrowers who may not meet the credit score or down payment requirements for a regular land loan.
When buying a property directly from the seller, both parties usually sign a land contract. This legal document records the sale of the lot and any other agreement between the two parties. When financing a property directly through the seller, it is important to note that you may hold fair title to the lot, but technically you do not hold legal title until you have repaid the loan. Sellers also have the right to apply any restrictions or personal requirements they wish to include, so it’s important to work with a reputable seller and make sure you know the exact terms of the loan agreement.
Home Equity Loan
Another option for buying land is to use the equity in your home to finance the purchase. A home equity loan is essentially a second mortgage made up of the equity you have built up in your home. This can be withdrawn in the form of a lump sum which you will repay in fixed installments. It may be easier to qualify and finance land using funds obtained through a home equity loan, as lenders consider it to be less risky because the funds are tied to your home as collateral. You can also get lower interest rates by going this route.