Land Loans and fianacing

   / Land Loans and fianacing #1  

paulsharvey

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Jan 21, 2016
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Location
Hawthorne, Fl
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Kioti CK2610 HST
Wife and me are casually looking at a 40 acre property, fenced, woods, no home, well, and septic. Normal banks won't do land loans, and I have heard Farm Credit will/may. The property is only 2 miles from our current house. Couple questions

Are land loans at a higher interest rate?

I've heard you need high down payments, how high are we talking?

Can you borrow against a 401k for the down payment?

Can you get a land loan, and when you put a mobile/modular (maybe in 1-2 years) convert land loan to regular mortage?

The property has some decent timber, which I could use to offset some of the down payment, any special pitfalls with that?

We would eventually sell existing home, once other is move in ready, but not right now. Could I get a home equity loan on my current home to cover down payments?
 
   / Land Loans and fianacing #2  
Unless someone here is a banker in your local market... you would be better off asking your own local bankers. That said, I have bought my fair share or raw land over the years. Banks hate to loan on raw land... it's called land banking. IMO ....th y hate that people could finance a land purchase..then sit back and wait for it to grow in value..then dump it and the bank is shorted on interest payments for the next 30 years...that's my .02, .. but..when we now buy land, we will put it under agreement with the seller subject to building permit and financing if needed. Once you have a building permit in hand, a bank is more likely to hawk you on a loan provided you clear the typical hurdles. ..Valuation, Credit worthless, Debt to income ratio, etc etc etc.
 
   / Land Loans and fianacing #3  
I've a land loan for about 70 acres with the Mississippi Land Bank. If you are in a rural area in the south they seem easy to get if you have good credit. Interest rate might have been a smidge higher than a regular loan but not bad. Good people oriented towards the farmer.
 
   / Land Loans and fianacing #4  
Not sure on the name now but was called the Federal Land Bank was funded it not mistaken by the Federal Government. Rates in single digit. We financed our first house with them about 75. Last time I talked with them was about two years on building a hay barn. Decided not to but what they wanted was very reasonable. If you are willing and able to you might be able to use your current property as a down payment is one is required. Of course if something happened you would lose both. Best thing to do is get on phone with them.

If it were me before I sat or built a house on it would ask about cutting an acre or two from the tract to give me more options is I ever wanted to sell the land or the house. Ask on taxes and insurance both ways. Some home insurance companies will not insure the house if on more than I think 5 acres. Of course a lot of this can vary from state to state.
 
   / Land Loans and fianacing #5  
Two years ago, when I looked into it, you need something like 50% down.

We ultimately refinanced our house and took money out to pay for our land in cash. I would highly recommend that route.

Land is no good to a bank without electric, water, septic and a house...so you are kinda on your own.
 
   / Land Loans and fianacing #6  
I just bought bare land in June, and financed it thru Farm Credit Services. They required a 30% down payment and my interest rate is 5.5%
 
   / Land Loans and fianacing #7  
Farm land banks would finance at reasonable rates with 30% down payment in rural area. I financed my land with Heritage Land Bank in North Texas.
 
   / Land Loans and fianacing #8  
Not sure on the name now but was called the Federal Land Bank was funded it not mistaken by the Federal Government. Rates in single digit. We financed our first house with them about 75. Last time I talked with them was about two years on building a hay barn. Decided not to but what they wanted was very reasonable. If you are willing and able to you might be able to use your current property as a down payment is one is required. Of course if something happened you would lose both. Best thing to do is get on phone with them.

If it were me before I sat or built a house on it would ask about cutting an acre or two from the tract to give me more options is I ever wanted to sell the land or the house. Ask on taxes and insurance both ways. Some home insurance companies will not insure the house if on more than I think 5 acres. Of course a lot of this can vary from state to state.

We own 150 acres clear. Last year we built a new house and shop on it. We parceled off 3 acres to set them on. Kept the remaining 147 acres clear. Owe $30K on the 3 acres with new house and shop. Minimizing our risk considering worst case scenario.
 
   / Land Loans and fianacing #10  
My only experience was borrowing against our paid off home. Our situation was a little better since the land adjoins our home land.

As far as timber sales go you can plan on them leaving a much more expensive mess than you will get for the timber.
 
 
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