Land Loans Archives - SouthStar Bank, S.S.B.

by SouthStar BankSeptember 15, 2024

All a Buyer Needs to Know About Land Loans – Part I

Land loans are used to purchase land without a house on it. You can use a land loan to build a home or a business. There are several types of land loan. Vacant Land Loan or Raw Land Loan This is unimproved land that cannot be developed due to the lack of utilities including roads, water and sewer lines. Undeveloped Land Loan Unimproved land is comparable to raw land in that it may have some older structures or basic infrastructure, but it typically lacks the full range of water, electricity, and other amenities that you’ll require. There may have been a house on this property at one time, but not anymore. Improved Land Loan This kind of land is suitable for building a home and has access to utilities and highways. These areas could also be referred to as lots. How do Land Loans Work? Land loans are similar to conventional mortgages in that they require a down payment, and are backed by the assets they buy, and are repaid over time. A loan officer will assist you in applying for the loan and examine your credit while you work with them. With land loans, the borrower would follow a similar process to that of a typical home loan. Although individual lenders may choose to set more strict requirements, the Federal Deposit Insurance Corp. sets minimum down payment requirements for land loans. The FDIC requirements are as follows: Land Loans – 9 Types Land loans can be more difficult to obtain since they differ from conventional mortgages, but you still have options. Here are some possible financing options for your piece of land. 1. Bank or credit union loan 2. Government land loan programs 3. Home equity loan 4. HELOC 5. USDA loan 6. SBA loan 7. Personal loan 8. Buying a teardown SouthStar Bank Land Loans Our lenders specialize in land/lot loans and will help you secure your chosen site until you’re ready to build. But we don’t stop there! We offer construction loans and construction-to-permanent loans to help you build your home. We make it smooth and easy to move through each stage of the custom home building process. Ready to get started? If your down payment is lined up and your credit is in great shape, talk to us. We’re excited to help you secure the lot of your dreams.

Lot Loans, Real Estate Investing

by SouthStar BankMay 15, 2024

Everything You Need to Know About Land Loans

Thinking about building a custom home? If you can’t find the house of your dreams, building your home can be ideal. All you have to do is finance the process. Fortunately, you don’t have to have a pile of money in the bank to do just that. Instead, you can take out a land loan. Land Loan: What is it? A land loan, also known as a lot loan, is used to fund the acquisition of a piece of land. If you’re interested in purchasing land on which to build a house or other structure, you can get a land loan. The type of loan you choose will depend on where you want to acquire land and how you’ll use it. Land or lot loans are also a preferable option for potential home builders who have a concept but who might not want to start building and financing a house immediately. If you are worried that your construction has to be delayed or if you’re still finalizing your home plans, then a land loan is probably the best option for you. How Do Land Loans Work? You’ll typically need a down payment of at least 25% to take out a land loan. You’ll need a credit score of 720 or higher to take out a land loan. You may also need to provide your lender with information about how you intend to use the land. This often means conducting due diligence in regard to the property’s existing zoning, land-use limitations, surveyed boundaries, and existing utility access. This information will help lenders assess the potential risk of the loan. Lenders adjust interest rates in response to these factors, but regardless, you should expect higher interest rates than you’d see from a traditional mortgage. This is because a land loan is riskier for the lender than a mortgage. However, if a borrower has superior credit and a lower debt-to-income ratio, they may be eligible for lower rates. Once the borrower has been approved by a lender and accepted the loan’s terms, they will be responsible for making a down payment and repaying the loan at the decided interest rate. In addition, land loans typically have shorter repayment terms than traditional home loans. Terms typically range from 12 months to 3 years. Another option for borrowers, is to convert the land loan into a conventional mortgage after the building of your new home is finished. This will allow them the chance to get a fresh principal balance and a cheaper interest rate through refinancing. Converting Loans A land loan lets you secure a piece of land until you’re ready to build. You’ll only have to pay for the costs of holding the land itself. When you’re ready to start building, you’ll want to convert the land loan to a construction loan. This loan is a 12 to 18 month loan. Your land loan will roll into your construction loan, and the down payment you used on your land loan will be applied to […]