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One of the differences between the two is how the loans are structured. Mortgages come in a range of options to suit your needs and budget, but there are much fewer options for purchasing land. Many land loans must be fully paid within three to five years. Interest rates and down payments are also usually higher on land loans than on mortgages. A typical down payment can range from 20-50%. However, some banks will allow a lower down payment if you have an excellent credit score. Securing a lower interest rate is a lot tougher, though, as land only loans are riskier for the lender since there really isn’t any collateral, such as a home. Therefore, lenders are less inclined to offer lower interest rates. One of the benefits of purchasing land with cash is that the amount you pay for the land can be used as a down payment towards your construction loan when you’re ready to start building your home. Lenders can also include your land purchase within your construction loan in some cases. Most experts recommend purchasing the land with cash, if you have it. A land specialist can advise you on your options, and a financial advisor can assist you in liquidating assets or arranging finance options.

 

The Importance of Using a Qualified Land Agent When Buying Land

A qualified land agent will have the knowledge and experience to help you maximize the value of your land transaction. Land agents will be able to provide you with important information, resources, and a network of land experts that a traditional real estate agent likely would not have access to in their role. Additionally, they’ll save you a lot of money because they’re well aware of the costs, paperwork, and legalities of a land purchase. Some of the other important ways a qualified land agent can help you include:

  • They’ll have information on zoning laws detailing what can and can’t be done on the land you wish to purchase.
  • They’ll have information on city ordinances you would have to adhere to.
  • They can help you hire a professional land surveyor should you need one.
  • They can help you estimate the utility costs for running water and electric to your new home.
  • They will have information on easements.
  • They can tell you if the lot you intend to purchase falls within a floodplain.
  • They can help you with permits before the construction of your home.

Checklist For Land Buyers

  • Zoning & Permits
  • Special Tax Assessments
  • Easements & Deed Restrictions
  • Property Boundaries
  • Water Rights & Soil Productivity
  • Future Land Use Planning
  • Crop & Timber Yields
  • Well water quality and flow
  • Road & Driveway Maintenance
  • Fire & Ambulance Services
  • Electricity and High Speed Internet Options
  • Flood Zones
  • Past & Present Land Use
  • Adjacent properties’ land uses
  • Past Logging Practices
  • Surveys
  • Topography & Geo hazards
  • Property Taxes & Associated Deferrals
  • Hardship & Farm Help Dwellings
  • Financing Options for Rural Property
  • Market Valuations & Inspections
  • Sale Negotiations

Buying Vacant Lot FAQ

What is due diligence when buying land?

Due diligence simply means doing your research on a piece of land and taking precautions before you make a purchase. Engaging the services of a reputable real estate agent is recommended to ensure due diligence.

 

What should I check before buying land?

There are a number of things to check before making an offer. These include checking to ensure the title on the land is clear, that you can legally carry out your plans for the land, and whether it's hooked up to municipal utilities or not. A real estate lawyer can be of great assistance in carrying out some of the checks, as there is a long list of them.

 

Is buying vacant land a good investment?

Land ownership can be a great investment, as long as you do your homework ahead of time so you don't succumb to some of the pitfalls. Key factors to consider when deciding value is location, soil quality, drainage, road access and zoning restrictions.

 

Is it better to buy vacant land first and build later?

Buying the land first and then building on it later allows you more freedom to do what you want with the property, but it likely won't save you money. Be sure to double check that government zoning restrictions won't prevent you from building your dream home on the land you're purchasing. Alternatively, a house and land package may help you save costs, but will likely limit the amount of customization you can do. This sort of option is often available when a big developer buys a large plot of land and subdivides it into lots for a neighborhood. You may also be limited as to what you can do on your property. For example, you may not be allowed to build a fence, put in a pool or hot tub, or have campfires.

 
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