How to Finance Buying Land: Should We Go into Debt?


| 11/22/2014 1:20:00 PM


Tags: Jennifer Kongs, Kansas, small home big decisions, building a home, loan financing, buying land,

Winter Sunset Over PastureThe Small Home, Big Decisions series follows Jennifer and her husband, Tyler, as they build a self-reliant homestead on a piece of country property in northeastern Kansas. The series will delve into questions that arise during their building process and the decisions they make along the way. The posts are a work in progress, written as their home-building adventure unfolds.

Neither my husband nor I stand to inherit land. Nor have we won the lottery (at least not yet, although we haven’t tried very hard). We are not sitting on piles of money, and no one has dropped off bags of money on our front porch (but if you want to, please feel free.) We did, however, find a piece of land we love, and we did purchase it.

To have enough acreage to achieve our goals within the region we wanted to live in, we knew we would need financing. We got some help from family and we had some savings, but we needed bank financing to make that chunk of Kansas our very own. (We had a period of time where I tried to get Tyler to refer to us as “land baron and baroness,” but the sparkle wore off quickly after I saw how much the land baroness owed each month for the honor of her title.) The choice to take out a mortgage is not an easy one, and it’s not the right decision for everyone. If this is the path you are considering, here are some tips from our experience. (If you want to learn from folks who’ve gone the debt-free route instead, read our Debt-Free Home Reports  from real-life readers who’ve made it work without the bank.)

1. Not all banks will do loans for “raw” land. We had to call several banks until we found one that would even lend on undeveloped property. Farm credits or banks in smaller towns in mostly rural counties are a good place to start, as they are more likely to handle these types of investments.

2. Not all banks will lend on large pieces of land. Similar to the point above, you may need to do some searching to find a bank that will lend on more than 10 acres (a common lendable property-size limit we ran into). Sometimes, banks will want you to split the property to make two separate loans, a loan for land and a loan for building a house. It sounds complicated because it is. The reason this can happen is based on rules banks set as to what percentage of the total land value the house can be appraised for. So, in our case, in order to take out a 30-year mortgage on the house we will build, we’re refinancing to have the majority of the land paid back with the original 5-year land loan, and to have the house set up on 10 acres with a separate loan. Which leads us to our next point.



3. The appraisal of your house plans and the estimated value of your acreage matter. For us, our house plans (which we have yet to finalize) must be for a home appraised to a value that is no less than 80 percent of the total value of the 10 acres we are building on and including in the home loan. So, before you buy, you should know the going rate for an acre of land in your area as well as an average per-square-foot cost to build a new home. These comparisons are good to have not just to know if you’re getting a fair price for your land, but also because it could make a difference on what kind of home you’ll be able to build.

Karen
3/20/2018 5:21:56 PM

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Karen
3/17/2018 3:20:45 PM

I AM FINALLY FREE FROM FINANCIAL BONDAGE THANKS TO MOORE LOAN COMPANY (mooreloancompany@yahoo.com). Good day everyone,I can’t hide this great testimony that took place in my life I will love everyone to know it and be a partaker of this, that is why I want to share it to the whole world by placing this advert on classifieds, I am Mrs Karen Brown by name, I live in Chattanooga, Tennessee United State, I want to thank ROBBINSON MOORE for his kindness upon my family life, I never knew that there is still a sincere and trustworthy lender like this on the internet and on earth. Just some days I was in search for a loan of $ 100,000.00, As I was running out of money for feeding, School fees, My business was really going out of capital and my rent. I was scammed about $15,000.00 dollars and I decided not to involve my self in such business again. But a Friend of mine introduced me to a loan firm due to my appearance and doings and also my complains to her. And I told her that I am not interested in any loan deal anymore but she told me that there is still a sincere lender who she will recommend me to, And she gave me the details of this man who is called MOORE ROBBINSON. And I really put a trial and I am most greatful and lucky today, I was given a loan amount of $95,000,00 Dollars by this great firm MOORE LOAN COMPANY. If you are in need of a genuine, Sincere, durable and a truth worthy loan lender or financial assistance and also you know you can be reliable and trusted, capable of paying back at the due / duration time of the funds I will advice you to send your contact to them via email @[ mooreloancompany@yahoo.com] OR Test (414) 454-9493 . And you will be free from scams on the internet. Please I am begging everyone on earth to help me thank Mr ROBBINSON MOORE. And I will always being sharing this great surprise and testimony that happened in my life everyday to all that need loans. Contact them now if you are in need of a loan: AS THEY ARE EFFICIENT,DYNAMIC AND RELAIBLE.....Again there contact email [mooreloancompany@yahoo.com OR Text (414) 454-9493.


Maleek
10/12/2015 9:58:25 PM

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