Loans for Land
Thinking of buying some land? If you’re going to finance that purchase, you need to know that it’s not the same as getting a mortgage on a house. First of all, many of your big banks don’t loan on land. Bank of America, Chase, and Wells Fargo are unlikely to be of any help. Generally, you’ll be looking at local banks and credit unions. Second, the down payment requirement is higher. It’s pretty typical to see land down payment requirements at 25% to 40% and, in some cases, all the way to 50%. Third, the interest rate will be higher than a typical 30-year mortgage. Depending upon the length of the loan, it can be as high as 1 to 1.5% higher. And the length of the loan will usually be shorter – generally from 5 to 15 years. If you plan to build a house on the land right away, then you likely can get a different type of loan that will factor in the land purchase and construction. Otherwise, expect to put down more, pay a higher interest rate, and pay it off faster.