Your guide to Charlotte, NC land loan down payments
When the time comes to secure property for a home or business, you have more options available than to just purchase a pre-existing structure. Buying property in this way does have its advantages, such as giving you a space where most of the basic setup and structural work is already completed, but it ultimately limits what’s possible if you’re interested in achieving a particular look, feel, or functionality for your property.
If you want more control over what your property is going to look like, you may find that your best bet is one that’s altogether different; buying land without a pre-existing structure already built on it. This is often a cheaper option up front, but one that requires more work from you long-term; however, it’s also one that affords you the opportunity to truly build your home or place of business from the ground up in the way that you want.
While buying land can be cheaper than buying a house or commercial structure, it’s still most likely to be an investment of at least tens of thousands of dollars, meaning that you may need a Charlotte, NC land loan if you plan to build within this area. There are several things you’d need to secure a loan, but one of the most important ones is a down payment. In this blog post, we’ll explore what you need to know about land loan down payments, as well as provide more information about land loans overall.
What’s a land loan, and why might you want one?
As mentioned previously, a land loan (much like other property loans such as a mortgage) allows you to secure a piece of property without paying its entire value up front. In this case, unlike with a pre-existing house or commercial building, you’re securing a loan for an undeveloped piece of land.
While this creates more work for you than other options would, there are advantages to this option, depending on your goals. To reiterate, buying vacant land gives you the freedom to develop your property in the way that you see fit from the ground up, allowing you to tailor it to your goals or future interests.
There are three types of land that you can buy: raw land, which is almost entirely undeveloped and lacking features like road access or sewer lines; unimproved land, which may have access to some basic infrastructure but doesn’t offer all utilities you may need; and improved land, which provides full infrastructural and utilities access for any property you build on it.
How much of a down payment will you need for a land loan?
Land loans are offered by a variety of lenders, including banks, credit unions, government programs, and more. As a result, not every lender has the same down payment requirements for a land loan; additionally, not every lender actually offers a land loan. Those that do, however, will typically expect a higher down payment than in the case of a more traditional type of loan like a mortgage, as a land loan presents a bigger risk to the lender.
While each lender is able to set its own requirements for land loan down payments, the Federal Deposit Insurance Corp. (FDIC) sets minimum requirements for these loans. These minimum percentages vary based on the type of land you’re seeking a loan for. For raw land, the minimum percentage for a down payment is 35%; for unimproved land, the percentage is 25%; for improved land, which is most prepared for new construction and therefore presents the least risk to lenders, the percentage is 15%.
Secure your Charlotte, NC land loan with Mortgages By Jill