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Monday, June 29, 2009

Important Tips You Should Know Before Getting Into Your First Land Loan

Are you about to purchase land? Then you must be eager to take a loan. Land can be pretty expensive these days that there is always a dilemma on how to secure the right finance. Everybody wants a loan for an undeveloped land, which irks the lenders who are always happy to give a traditional mortgage than to make such uncertain deals. Thus, it takes good negotiation skills in order to convince potential lenders to offer you land loans.

A little homework has to be done before applying for a land loan. You need to have a complete statement on your credit, which if good offers you a golden opportunity for you to get into land development. A low credit score, however, can cause some problems and you might not be able to be granted a land loan. Even so, if you somehow manage to get it, the charges, monthly payments and interest might become too much for you to handle. In that case, I would advise against it.

Remember that you ought to have money in order to develop your land, apart from the money needed to buy it. This means you will need to apply for a larger loan. In such a scenario, if you do not have the suitable credit, you are advised to wait till your credit score improves. When you get into land loans in a hurry without proper reasoning, you may not be able to make the payments and consequently lose all the money that you invest on the land and left with nothing at hand.

It is quite obvious that a lender would like to know what the person borrowing the loan would like to do with the land he/she is buying. So, when you are able to prove to the lender that your intent is to build a house as soon as you get the land, chances are you will be able to secure a reasonable land loan. You better prepare some solid paper work and approach the lender with a specific development plan for the development and use of the land. That way you earn the lender trust and you minimize the risk involved in getting the land loan.

There are people who would apply for different land loans in order to buy the land and for constructing the house, which is not efficient at all. A good approach is to calculate the mortgage loan and credit needed to buy the house and then to sum it up in order to get the full amount in a single loan. Since you are going to build a house on the land, the lender wouldn't mind giving you a larger sum.

Even though there are lenders who hesitate to finance for undeveloped land, it is also true that there are some who favor unimproved land. So always contact a few lenders before settling on one of them. A good selection during that first stage can be really rewarding for you in the long run.


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