The Ins and Outs of Buying Land

In general, most people know about buying a home and how the mortgage process works. When purchasing and financing land instead of a home there are some differences. The one thing that stays the same is the lender.

Finding a lender is usually a pretty easy task when it comes to buying a home, but this is not always the case when you look to buy land. First South Farm Credit, with locations in Alabama, Mississippi and Louisiana has been in business for over one hundred years.

“When I talk to people, I find out that the hardest part for them is finding a lender who is willing to finance it. A bank, a credit union or a mortgage company doesn’t generally want to carry fixed rate land loans on their books for a long term. And if they do, you will likely see a higher down payment and interest rates and you will often be looking at an ARM or other unfavorable terms,” Daily Thomas who is a vice president and branch manage said. “At First South, land financing is what we do all day, every day and we try to make it as easy and convenient as we can.”

If you are considering purchasing land and using a lender such as First South Farm Credit, you will need to have at least 15% to put down. A good bit of the time you might need more depending on the terms. You can choose a five to thirty-year fixed rate loan or balloon note. A balloon note would be used if you would want to build on your land in the future, and once you start construction, you would roll the balloon note into a different loan. Remember that your interest rate will depend on your credit, the type of loan you are qualified for, the down payment you have and the overall market.

Just like with purchasing a home, it takes time if you do things right up front. If you rush just to get a faster closing, you might miss something or have a big problem come up. The typical time for closing when there is no appraisal is around 30 days, and around 45 days if an appraisal is required.

“That being said, my rule of thumb is that we can close within 30 days when an appraisal is not required and 45 days when it is, assuming there are no other issues, such as problems with the title, the need for a survey, etc. Some of that we can’t control,” Thomas further stated.

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