How Do I Get Financing on Land?

Buying land with financing should be the same as buying a house, Right?  Ehhhhh - - - not really. 

Obtaining financing on Land is a little different than when it comes to purchasing a house.  The long and short really comes down to what banks feel comfortable money lending on.  And because threatening foreclosure due to non-payment on unimproved land doesn’t get people's attention the same as losing their house, many banks stopped many lot financing programs.  However, we do have a couple options.

1. Construction/Perm Loans.  Otherwise known as a construction to permanent loan. The way it works is that you get a loan for the total cost to purchase a lot along with the cost to build the home.  You would go to settlement on the lot, and at settlement, the remaining amount of the loan will be held in an account and will pay the builder throughout the construction process at different draws.  Once the house is completed, the loan will convert from the partial loan to the full “permanent” loan.  We have seen some banks offering these loans through FHA and VA programs.

2. Short Term Lot Loan.  Some lenders and banks are starting to offer straight loans on lots, with the caveat that you have to build by a certain date.  Often these are between 2-7 years.  So if there is a lot you know you want to build on, but you just aren't ready to build just yet, this gives you that option.