Our customers are important to us because we genuinely appreciate the value the agricultural industry brings to our nation. Farming and ranching is hard work, and in times of unyielding weather and struggling economies, the challenges are even greater.
Owning farmland as a ranch or for commercial use is a worthwhile investment that you and your family will live to enjoy. You can start and run multiple projects on farmland depending on the passion and goals you have with the piece you own. Some people can buy off lands in cash, while others would require funding to facilitate the payments.
Getting a loan for land purchase is a wise decision to help you kick-start your farm project for business or personal needs. It gives you the flexibility of payments and helps you meet your goals. However, it’s important to be informed about farm loans before approaching land loan lenders to understand the policies and terms that will bind you.
What is a Land Loan?
A land loan or a lot loan is a source of funding used to finance buying a piece or plot of land. Land loans are taken to purchase land for building homes or business purposes. Buying land loans is the most common objective of launching a farming business. The amount of land loan you’d borrow from a land loan lender depends on the size and intention you have with the land.
A land loan is neither a construction loan nor a loan for running other projects. It’s solely meant to fund the purchase of land. If you need extra funds to fund the project you have in mind with the purchased land, you’ll have to seek another financier to assist you. Nonetheless, land loans are excellent options to ensure you secure your plot and decide how to utilize it.
Types of Land Loans
There are different types of loans for purchasing land. They differ in qualifications, purpose, and terms. It is essential to know their differences as it will help you when applying for one.
Raw Land Loan
It’s an undeveloped section – free from electricity, roads, sewer, and other amenities. Raw land loans are the funds borrowed to purchase these lands. However, getting raw land loans is difficult because of the risks involved.
However, you can increase your chances of getting one by using a few tricks. For instance, you can set aside a sizable down payment to offset a large percentage of the overall price tag on the land. You can also develop a solid business plan based on your intentions with the piece of land to show your commitment and vision with the land in question.
Unimproved Land Loan
It’s a slightly better version of raw land. It might have some amenities and utilities but still lacks a natural gas meter, an electricity meter, and a phone box. Despite the decreased risk in unimproved land, there isn’t as much difference when applying for such a loan as it is equally as challenging to get one as a raw land loan.
You will require a detailed business plan of your intent with the plot of land to increase your chances of getting the financing of such a loan. You will also be required to make at least 30% of the down payment and have a good credit score to back up your repayment ability.
Improved Land Loan
They are more developed with access to water, electricity, and roads. These characteristics make improved lands the most expensive alternative. However, unlike raw and unimproved land, you won’t need much input to develop the land. They are costly to buy but affordable to utilize due to the available amenities.
You’ll enjoy the same rates with an improved land loan. Nonetheless, you’d still have to make a solid down payment and have a good credit score to qualify for one. Improved land loans are typically higher in amount compared to unimproved or raw loans because the land is high in demand.
How Loan for Land Purchase Work
Before you can move forward with applying for a land loan, you should be aware of a few factors to ensure you get things right. A loan for purchasing land is a financing option with many risks, and it’s important to bypass the qualifications to qualify for one. So how do you go about it?
There are different types of land loans, and each has qualifications to be met by borrowers. However, general rules apply to all land loans you should meet as a borrower.
• A good credit score, preferably above 720
• A detailed explanation of your intent with the land loan
• Mention necessary property checks such as surveyed boundaries, zoning, access to utilities, and land-use restrictions.
These are the factors that land loan lenders use to determine the obligations and rates of the loan. Land loans generally have higher interest rates, but you can get better rates with a good debt-to-income ratio and credit score.
Once your loan application is received and reviewed, lenders will give the best borrowers feedback. Your loan will be approved, and you’ll have to agree to or negotiate the loan terms. Upon completion of the terms agreement, you’ll be required to make the down payment and begin to pay the loan principal and interest rate as agreed.
Acquiring a land loan is a critical step to starting your farm project. Not only does it help you acquire land for agricultural activities, but it also allows you to focus on other important issues involved in the project since that part will be sorted already. You must look for a reliable land loan lender who will give you the best rate and help you realize your dreams.
Contact United Farm Mortgage today for all your land loan inquiries.