is it difficult to get a loan for land without a house on it?

Question

i want to build my own home but for the time being i just want to get a lot to build on and start paying on it, i cant afford to build right now but with land going up and up in price i need to buy now while its low.
i would think land would be considered a good investment , its not going to lose vale so it ought to be ok to get a mortgage or some type of loan on it but i have heard it is difficult? is this true? is there a particular type of loan that i should look into for this? also would it help to put a very small "house" (like a shed with all the utilities) just so that you could say there is a house?

Answer 1

If you want a loan and have the means to pay it, the bank will have no issues. This is more common than you might think with the housing market the way it is right now. The bank will look forward to your future business when you decide to build.

Answer 2

It is not hard to get a loan for just land. You do not need a construction loan or anything else. The house that I live in now was just land when we bought it. We developed house plans, got the permits and then got a construction to build the house. At this time we have land in another part of the state and it had a regular loan. We may build on that one at a later date.

Answer 3

Loan To Buy Land

Answer 4

Many banks will let you borrow money on raw land. Loan to value may be different than with houses.

The shed idea will not help you. It will not create much value, which is want banks want.

Take adavantage of a seller like me and get some seller financing. You can always ask if the seller will offer some terms.

You will do best (always) by finding an undervalued property. That way when you buy it it is worth more than you paid, so it is like you put in a down payment. You can always put down a real down payment. These will help the lender qualify you and the lot. If you are in the northeast let me know, I may have a deal for you :)

Answer 5

No. Generally you cannot get a loan (mortgage) to purchase undeveloped land.
Creative financing would be a strategy. You could borrow money from your insurance policy and/or 401k program for instance.
Land is a good investment if it is in the RIGHT LOCATION.
A construction loan is a short term high interest loan to build something of value.
If you own land, then you can use it as collateral for a loan.
Houses are very cheap in some parts of the US like Detroit.

Answer 6

If the current market trend is on the up then lenders should have no problem lending to you. As long as you have a good reputation and can afford the repayments it would be classed as a good investment.
It is not difficult because loads of developers buy land and sit on it till the value goes up and it probably wouldn't help putting a shed on the land. There is no specific loan for this type of purchase apart form a mortgage.

Answer 7

land without the house comes in two varieties as far as lenders are concerned -- improved (ready to build on) and unimproved (not ready to build on). [90% ready is unimproved as far as a loan is concerned.]

For improved land, expect a bank to loan at most 50% of value as verified by appraisal. you can probably have any reasonable terms -- five or seven years should be ok, but shorter if you can afford it.

For unimproved land you'll have problems. First, you'll have to show that you have the legal right to build on that property [that building there fits the master plan and current zoning]. Without that, I doubt you'll get a loan from a bank [the property would be unsalable if they had to foreclose].

They'll also want to be more conservative about the appraisal and the proportion they'll lend. [Land is harder to sell if there are no utilities or roads.]

Of course, if the amount is fairly small, your good credit may carry the day.

GL

Answer 8

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RE:
is it difficult to get a loan for land without a house on it?
i want to build my own home but for the time being i just want to get a lot to build on and start paying on it, i cant afford to build right now but with land going up and up in price i need to buy now while its low.
i would think land would be considered a good investment , its not going to lose...

Answer 9

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Answer 10

Buying and holding land can be problematic as you have no income, unless it has oil under it with rights, or if you are leasing to a farmer, or cutting wood off of it. No income to retire debt, no income to pay taxes, and even though there is no building you may want to consider some type of insurance to protect yourself from liability. Land can also lose value, granted you keep the land rather than the stock market where you can lose everything. If you don't pay the taxes, the govt will take it, so you have to keep paying to hold on to it. You may consider taking out a loan with the cost of building the home into it. good luck