Land/Lot Loans... (loan, interest rate, 401k, rental house)

[evilnewbie]

So I made an offer to buy a piece of land... and I thought I would look up lenders/websites talking about closing costs and applications... I am looking to whittle down the price to 130k and pay 20% down payment on the lot loan... and it seems the closing costs can cost up to 3k (is this right?)... and as I am reading they are asking for W-2s, paystubs, and bank accounts for the past two months... that seems okay but then they also list 1040s, 401k, IRA, mutual fund accounts, etc... ummm... that seems a bit invasive... is that just me? I am not going to hand over my account numbers to my retirement or my tax information if I don't have to, that's my business.... is that just me or is this typical for them to collect this information?

[Bette]

Very typical. Land or lot loans are hard to get right now. I've got one looking for a refinance......the only ones I am finding are rates at 10% and up. My guy won't go for that.

[chet everett]

It is completely within the right of the lenders to ask this information. If you choose not to supply it they are completely within their rights not to make you a loan...

Personally I would NOT enter all that on-line, not just because I am paranoid about hackers, but because the more information like that you give them the more they can claim that you have a "relationship" with them / their partners to sell you all sorts of financial advise that is crappy!

If you need a loan to buy vacant land expect EXTRA SCRUTINY from ANY lender. Even in the best of times vacant land is NOT THE SAME as a single family home and people default on such payments with MUCH greater frequency than for homes.

The idea is that if you are a DEVELOPER you need a BUSINESS LOAN (expect about 10% interest unless you are on the Board of Directors of the bank...) and that is NOT a mortgage. If you are NOT a DEVELOPER then you either want they land to build your own home OR for speculative purposes. NEITHER of those things have good odds of you paying back the loan. That is just the reality.

Unlike a rental house, vacant land generates ZERO cash flow. It may stay at the same value for decades. It may suddenly plunge in value due to factors beyond the control of normal property owners ( town decides the 40 acres next to your lot would make a great landfill...). Banks do not like to lend to normal people to buy vacant land...

If you have a track record of developing land you might have a somewhat easier time of borrowing to expand your business, but that does not sound like what you are trying to do.

Similarly, if the land you are interest in is part of a developed area you could apply for a construction loan AND factor in the cost of the land, BUT you are going to need a HUGE downpayment, typically something like 33% or more so that you are essentially paying cash for the land and just financing the construction.

Alternatively there are loans for 'rural development' that some states / counties have to encourage farmers to build out places. Check into that...

[bigwhitehairydog]

I purchased a building lot in 9/07 for over $300k in the Charlotte area. The loan is with B of A and is interest only for 3 years. In 9/2010 the payment jumps $1100!! Does anybody know what is out there for lot loans? My current interest rate is 7.35%.

I have tried to sell outright and to trade with custom builders for inventory homes all to no avail. I have considered trying to trade with a builder for his less expensive lot and have him build on it for me.

Does anyone have any advice?