People with unrealistic expectations

[justinramani]

For me, I could only get a 15 year loan on my land when I bought it and like the others have said, it was 25% down

Eddie

I was only able to get a 10 year with 25% down. Interest rate was higher than conventional loan as well.

 

[MossRoad]

We got ours back in 1989 for 30 year mortgage. 20 acres for $30k. They wanted 20% down, now that I think about it. That would have been $6k. We didn't want to give them $6K. So we took out a blanket mortgage that covered our house and the land we wanted to buy. House and land together was worth $60k. We already owned 100% equity in the $30k house, so, combined, we owned 50% equity in the house and land together. Since 50% is more than 20%, we had to put no money down on the land!

 

[Baby Grand]

I thought that the banks were really cracking down on the risky loan business that caused the recession. I guess they are loosening up a bit. I hope your friend makes the right choice and finds a house in the country for under 100k.

They are backsliding.
They can't help themselves.
bdog, you are a good friend to be concerned that he'll get taken to the cleaners, and to let him know it.
From what you say about the deed restriction, it doesn't sound like a situation where he'll come out ahead.
It hurts to watch this happen to someone you value, but there's only so much that you, alone, can do about it.
Maybe he needs a few more real friends like you to look at his prospects and tell him, honestly, where he stands.
Even if it's not what he wants to hear.

 

[s219]

The scary part is the bank has approved him for 100k and I worry he will blow it all on land and then not be able to build and lose it all.

So was that a construction loan or just some sort of mortgage? In either case, the bank will have some sort of say on what can be bought and may or may not allow purchase of just land. Construction loans are especially "managed" by the bank, with periodic inspections, payouts, etc. The bank will roll the land and home together in the final mortgage, of there is one, since you can't really separate the home from the land. All that will go into construction loan calculations and approvals. Any legit bank won't let him do something stupid -- they are pretty nervous about construction loans and mortgages these days.

 

[newbury]

He might be pre-approved to buy a house for $100 grand, but there is no way they would approve him to buy raw land without a huge down payment.

Eddie

And that may be a $100K house w/ 20% down.

I agree with others that things aren't adding up.

The USDA does have a loan program for low-income rural housing, but I have never heard of that program making loans on land alone.

Steve

Our "land bank" makes loans on raw land, but the rate is only fixed for 5 years.

If the guy really only makes $25K/ year w/ a wife and 2 children he's at the boundary of the poverty guideline 2015 Poverty Guidelines. He needs to wake up and smell the sewage and get motivated.

Perhaps 5 acres for < $5K and a self built small house is possible. Or if he can get a foreclosure cheap. It's good to have high aspirations but you often have to work your tail off to achieve your dreams.

Unfortunately he seems like many of the people that got caught up in the 2007 house financing fiasco. They want what all the people on TV commercials have. The problem is that "it don't come easy" and the banks will still loan enough so you can drown in debt. I remember many people in my area bragging about over borrowing in 2007 and lamenting foreclosure in 2009.

 

[300UGUY]

Quick google search 24,250 is the federal poverty level for 4 people. That's pretty freaking poor. I know I couldn't do it with just my wife and I.

 

[trihounds]

Here in Canada, at least Ontario, the banks don't loan (except perhaps a line of credit) for land nor will they finance home construction on land that isn't fully owned / paid for. Some banks don't advance cash during a construction loan until your house is closed in from the elements. Building without sizeable cash reserves or at least access to cash just isn't possible.

I know that's not on topic of the thread but some may find it interesting.

I wish your friend all the best. I hope he needs your subtle warnings.

 

[AGRIMAN]

He might be pre-approved to buy a house for $100 grand, but there is no way they would approve him to buy raw land without a huge down payment.

Eddie

I dont know Eddie, things must be different across the county. I bought 40 acres of pasture that came up sale 3 years ago with no down payment. I think some times it has a lot to do with the relationship you have with your banker.

 

[300UGUY]

And you canucks don't have the financial problems we do.

 

[texasjohn]

OMG!!!! I have heard this before...I'm having a sense of deja vu...all over again

You guys (and I) expect the bankers to be the archetype conservatives who guard their funds and insure that loans they make will be paid back properly and protect themselves by demanding significant percentage down payment so if property values fall, (nah, they ain't making any more land!) therefore they would be well covered.

I think we gotta learn that they are not like that. The bankers don't have a role of protecting the borrower. Rather, they just have to keep dancing fast enough to not be caught in the next bubble with PERSONAL losses.... losses for the taxpayer in general and foreclosed borrowers is just fine...it's FREE ENTERPRISE after all.

Seems the reality is that many hard working folks dream of having a piece of the 1% american pie they see daily on the tube...and don't have the perspective to realize that they are now, always have been, and will always be "have nots."

As some of us have noted....we started small, worked hard, made choices which worked out to our benefit which we ascribe to our brilliance and keen insight. And, with nothing but our bootstraps, upbringing, educational opportunities, native intelligence and other accidents of birth, we have attained some degree of power and pelf which allows us to comment on the foibles and follies we perceive in others. As for myself, my understanding and perspective is surely limited because my annual income is below the $540,000 or so needed to make the 1% category.

Sounds like the bankers are, again, encouraging another bubble....guess we all better get us a piece of cheap loans before they go away.

And I do hope that the OP's friend making $25k with spouse and two kids can win the lottery and get the house and land of his dreams!