A Guide to Buying a Home With Land

The MOTHER EARTH NEWS editors provide a guide to buying a home with land, based on 24 house-buying and property-purchasing escapades.

  • The MOTHER EARTH NEWS editors' provide a helpful guide to buying a home with land.
    The MOTHER EARTH NEWS editors' provide a helpful guide to buying a home with land.

  • The MOTHER EARTH NEWS editors' provide a helpful guide to buying a home with land.

The MOTHER EARTH NEWS editors' guide to buying a home with land

Whether it's an acreage hidden in the hills or a townhouse in the middle of a bustling city center, most of us are searching for a special place we can call home. We devote immeasurable hours imagining what we want, but may not know exactly how to find it and buy it. When a perfect Craftsman bungalow or spring-fed five acres finally does appear, we need all the advice we can get about how to make the wisest possible purchase. After all, buying a house or buying a home with land is certainly one of the biggest single expenditures most of us will ever make. And once you've bought it, there are no refunds or exchanges. It only makes sense to be cautious and know as much as possible before you buy.

First, forget the Joneses and home in on what you want — and what you can afford. Be realistic and you won't be disappointed. Examine your budget and figure out exactly how much money you can comfortably invest. Most people borrow money to buy a house, and most loan agencies will require you to pay at least 5 percent down in cash. They usually will loan you an amount that results in monthly payments between 27 percent and 33 percent of your net income, depending on your debt-to-income ratio, which they will help you determine. If you expect to apply for a loan, now is the time to amend a poor credit rating or establish your credit history. These factors determine how much interest you'll pay and what kind of down payment the bank will require. And don't forget to consider closing costs, inspections and miscellaneous expenses, which usually add at least a couple thousand dollars payable at closing.

If you're planning to buy undeveloped land, you should expect to pay at least 20 to 50 percent down in cash. Interest rates for a loan on the remaining 50 to 80 percent probably will be higher than for home loans.

When you're ready to buy, shop around to get the best bank loan terms you can. Credit unions may offer competitive rates and usually are easy to join. Mortgage companies have become aggressive, creative marketers for loans.

Check with your lending agency about obtaining pre-approval for a mortgage loan, so you're confident of what you can afford.

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