There is a lot more to know about Arizona Land Loans than just the traditional information such as interest rates and terms. These three pieces of information are essential for borrowers to know before looking for a loan.
When you are looking at buying a house, you know that you need to talk to banks and other lenders to determine the amount that you can borrow. That information is what will determine the price of the house that you can afford. But when you are buying land, there are a few more things that you need to take into consideration. Knowing these three tips will help you to make a better and more well-informed choice about getting your Land Loan and how to use it.
When you are buying land, it is not the same as buying a lot in a subdivision. A lender is going to require a detailed description of the property in addition to having the boundaries marked by a surveyor. You will also need to research any zoning or land use restrictions and provide that information to the lender. Having utilities on the lot is also a significant benefit. Lenders know the cost and time involved in site improvements and is happier to lend their money on lots that already have water, electricity, sewers, and roads.
How you plan to use the land can also have a significant impact on the loan. Lenders like property with structures that are considered tangible assets or collateral. If there is no structure, but you are planning to build immediately, a lender will traditionally offer terms including a 10% to 20% down payment. If the lot will sit vacant for an extended period of time, the down payment could be as large as 50% of the property’s value. And if the improvements are not going to be substantial, say a barn or storage facility, the interest rate, and down payment will both be larger. This is because the lot itself does not hold much value, and the lender does not want to take possession of empty land in the event that you default on the Land Loan.
Options for Financing
Due to all of the red tape and qualifications of a traditional loan for land, you might want to consider other options. In some cases, the current landowner is willing to offer what is called seller financing. Because this is a loan between two private individuals, the terms are all negotiable. Another option is to seek a local credit union or lender who might offer more favorable terms than a larger national lender. Or, if you own additional property, you might be able to finance the land yourself by using a line of credit on the other property.
For greater flexibility on the terms of a Land Loan, consider borrowing from a private or hard money lender. This is a person whose business is lending money. And the best part of this type of loan is that the lender is free to set the terms that work best for both himself and his borrower. Check out all of your options before selecting the type of loan that you will be using when buying a piece of land. Investing a little time could save you a great deal of money and frustration.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.