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Old 08-05-2009, 11:07 AM
 
Location: Back in Clarks Summit
98 posts, read 412,761 times
Reputation: 64

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I'm trying to find out where I can get financing for a land purchase. I've had a real difficult time finding lenders to complete this.

Does anyone know where I can turn. I can't really afford to take out a private loan for it so I need a longer term for the land.

Any help you can give me would be great.
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Old 08-05-2009, 11:36 AM
 
21,579 posts, read 36,422,679 times
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Very few lenders will touch a deal that is for raw land that you will eventually hope to develop / put a house on. Very poor collateral, and even if the land were to appreciate it is very very hard to market.

If you cannot find a government program and you cannot borrow enough money "unsecured" you will have to get creative. If you have another home you can max out your equity in that, though technically the lender will probably have exclusion against using proceeds from that buy raw land, the odds of them tracing the cash dollar-for-dollar is very slim.
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Old 08-05-2009, 11:51 AM
 
Location: Back in Clarks Summit
98 posts, read 412,761 times
Reputation: 64
Quote:
Originally Posted by chet everett View Post
Very few lenders will touch a deal that is for raw land that you will eventually hope to develop / put a house on. Very poor collateral, and even if the land were to appreciate it is very very hard to market.

If you cannot find a government program and you cannot borrow enough money "unsecured" you will have to get creative. If you have another home you can max out your equity in that, though technically the lender will probably have exclusion against using proceeds from that buy raw land, the odds of them tracing the cash dollar-for-dollar is very slim.
Lovely. Since I'm going to be a first-time home owner, I don't have another home to use.

I'll call some more banks to see if I have any options. I'm not looking to borrow a huge amount of money (only around 35k), but taking out a private loan right now isn't an option due to the upcoming birth of my child.
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Old 08-05-2009, 01:50 PM
 
3,332 posts, read 7,386,818 times
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Quote:
Originally Posted by The Bad Guy View Post
Lovely. Since I'm going to be a first-time home owner, I don't have another home to use.

I'll call some more banks to see if I have any options. I'm not looking to borrow a huge amount of money (only around 35k), but taking out a private loan right now isn't an option due to the upcoming birth of my child.
Best bet would be to try your local bank where you have your accounts. They may want 30%-50% down, but.....
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Old 08-05-2009, 05:12 PM
 
Location: Back in Clarks Summit
98 posts, read 412,761 times
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I found a few lenders in my area willing to work on a loan mortgage.

The one offered me a balloon mortgage for 5 years, which would expand to 20 (I honestly don't know how that works) with a 6.75 interest rate

The other one offered me a 5 year balloon which expands to 15 for 352 a month. The interest rate is 8.875

Since I'll have a house built in 2 years, I won't have any issue with the 5 year balloon payment.

I have more lenders to call tomorrow.

Are any of these 2 options attractive?
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Old 08-05-2009, 05:36 PM
 
21,579 posts, read 36,422,679 times
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The balloon is not a bad deal. If you don't have the house build in 5 years and are still just paying off the land it sound like they would switch from interest only to a 20 year amortization. Frankly I surprised that they are willing to offer such terms. The interest rate is probably about half what you pay on an unsecured loan. If it checks out that might be the way to go. The 5/15 is going to be a much less pleasant thing to live with -- more than 2% extra interest and a worse amortization after the interest only portion. Yucko! They really do not want to make it easy for you...

Before I would sign any of those I would triple/quadruple/quintuple check all the details AND BE VERY VERY sure that I also a big pile of SAVINGS to get the CONSTRUCTION LOAN going to get the house built and shop the BUILDERS that I would be using as well as getting solid estimates for the total cost. Basically if the land costs $35K you are going to have lenders that want to see building costs (material and labor) adding about $110K and the area better have homes that would sell for about $150K. That means you income better be about $50K and you need to have about $30K in CASH too. Gets very very hinky...
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Old 08-05-2009, 07:50 PM
 
Location: Plano, Texas
1,672 posts, read 4,424,774 times
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I would check with some credit unions in the town you are buying the land.
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Old 08-05-2009, 10:00 PM
 
Location: Back in Clarks Summit
98 posts, read 412,761 times
Reputation: 64
Quote:
Originally Posted by chet everett View Post
The balloon is not a bad deal. If you don't have the house build in 5 years and are still just paying off the land it sound like they would switch from interest only to a 20 year amortization. Frankly I surprised that they are willing to offer such terms. The interest rate is probably about half what you pay on an unsecured loan. If it checks out that might be the way to go. The 5/15 is going to be a much less pleasant thing to live with -- more than 2% extra interest and a worse amortization after the interest only portion. Yucko! They really do not want to make it easy for you...

Before I would sign any of those I would triple/quadruple/quintuple check all the details AND BE VERY VERY sure that I also a big pile of SAVINGS to get the CONSTRUCTION LOAN going to get the house built and shop the BUILDERS that I would be using as well as getting solid estimates for the total cost. Basically if the land costs $35K you are going to have lenders that want to see building costs (material and labor) adding about $110K and the area better have homes that would sell for about $150K. That means you income better be about $50K and you need to have about $30K in CASH too. Gets very very hinky...
The land is in an area where my inlaws just sold their house. They sold it for 250,000 and it was an older house with dated materials. I know the area is a great area to build so I'm not worried.
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Old 08-06-2009, 09:14 AM
 
9,807 posts, read 6,263,456 times
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The problem, a banker told me, is when you add the land price,( and driveway,septic, water, etc to the building of a house, the cost exceeds the price it can be sold for.

Also, since you are not building in 2 years, maybe the bank isn't sure if it wants to loan the money for the house 2 years down the road.

I doubt you will get a home loan from a different bank since the one loaning you the money for the bare land is the bank with the first mortgage on the land.

Kinda risky for a different bank to finance the house on land they don't control.

Kinda risky for the bank who would loan you money on the land to commit to financing a house that won't be built for 2 years.
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Old 08-06-2009, 07:58 PM
 
Location: Back in Clarks Summit
98 posts, read 412,761 times
Reputation: 64
Thank god for my wife's grandparents. They offered to front us the cash to pay for the lot in full without using a lender.

Put in an offer tonight. Hopefully it gets accepted.
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