Types of Land Mortgages to Consider
Let’s take a look at what types of land mortgages you have as options. All of them have specific requirements.
Raw Land Loan
As mentioned earlier, raw land requires development to use correctly. And raw land loans require a detailed description of how you’ll use the land. You’ll need to showcase every step of the development process to assuage the lender. Then, you’ll likely pay a sizeable down payment and need good credit. Thankfully, raw land costs less than developed property. So, you might still do well with this option.
Unimproved Land Mortgages
What’s the difference between unimproved and raw land? Unimproved land typically includes some utilities and amenities. However, it requires electrical and gas meters. Some also require phone boxes. Thankfully, lenders consider this land less risky than raw property. Therefore, they’re more likely to approve your loan. That said, you still need to provide a detailed description of the property’s use.
Improved Land Loans
Improved land includes most utilities, water, and easy access to roads. Some may even include landscaping and driveways from past buildings. These loans require the least down payment and provide better interest rates. In this way, they’re the easiest type for most people to obtain. However, improved land lots may be hard to find. As a result, investors often buy them very quickly when they’re available.
After buying property to develop, you need a construction loan. These include options like construction-to-permanent and stand-alone loans. The first type consists of all construction and mortgage costs. The second requires two different loans for each. Expect a down payment of at least 20% with this loan.