If you’re buying a piece of land in Lake City, you can get traditional financing or use owner financing. Either way, this guide explains the most frequently asked questions about land loans – and if you don’t see the answer to your question here, please feel free to call us at 386-243-0124 to ask. We’ll be happy to give you the information you need.
Land Loan FAQ
Check out the following questions and answers related to land loans.
How Do Land Loans Work?
Land loans are just like any other type of loan, which means you’ll need to have decent credit, a low debt to income ratio, and a down payment. However, many lenders consider land loans to be riskier than home loans are; That’s because there’s no property that the lender can use as collateral. That means these loans often have higher down payment requirements, as well as higher interest rates.
Most land loans typically only last between two and five years, and often, at the end of the loan term, the lender will require you to make a balloon payment to pay off the balance of the loan.
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Is a Land Loan the Same as a Construction Loan?
Land loans are not the same as construction loans. Land loans only give you the money to purchase the land, while construction loans give you money to buy land and build a house. Construction loans are typically shorter in duration than land loans are; many only last for about a year. At that point, the borrower must convert their loan to a mortgage.
How Can You Get a Land Loan?
Many financing institutions will be happy to give you a land loan if you qualify. However, you may need to go through a special program, such as the USDA loan program or the Small Business Administration, which offers SBA 504 loans. Your alternative is owner financing, which your real estate agent can tell you all about.
What is Owner Financing?
With owner financing, a buyer and seller work together to work out the terms of a sale. The buyer pays the seller directly each month, just like they would with a traditional loan, including interest and a principal payment. You’re free to work out whatever terms you’d like with the seller, including the amount of your down payment, your monthly payments, and the duration of your owner financed loan. There are a number of properties in and around Lake City that offer owner financing, which can be good news if you’re looking for land but you are not interested in a standard land loan.
Are You Buying a Home or Land for Sale in Lake City?
If you’re moving to Lake City, we can help you find the perfect place to live. Call us at 386-243-0124 to tell us what you want from your home and we will begin searching right away.
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