Land loans can be broken down into two subdivisions; residential and commercial. This distinction makes it easier for one to understand their terms and conditions since there can be a few differences between the two. There are various financial institutions in the market who offer both types of loans. Keep in mind that once again, terms and conditions of a land loan can vary depending on the type, the lender, or even the future prospects of the property and neighboring land.
Residential land loans are also sub divided into two more specific categories. Namely, the residential lot purchase and residential lot refinance. In case of a residential lot purchase, the customer applies for a land loan in order to construct a house for residential purposes while in the case of a residential lot refinance, the customer is hoping to acquire an already existing residential property.
In general, residential land loans are primarily for residential purposes, whether you are purchasing land for future residence or buying a pre-built house. Most land loans are usually available through a 30-year mortgage with a 3 year amortization term. Normally, the minimum amount sanctioned for such loans is about $ 75,000 and can go up to $ 500,000. As an applicant, you must be able to provide full income documentation in order to get approved for such land loans. The rate of interest varies with the different financial institutions, and if the loan is taken in order to improve or build a residential property for rental purposes, then it will be approved only after accessing the future prospects of that property.
As you would expect, there are two subcategories to commercial land loans as well. One is for agricultural land and the other is for commercial lots. An agricultural land loan will depend on the productivity of the soil and the financial institution will assess the loan after going through an assessment of the soil and the productivity of the land. When it comes to assessing a loan application for a commercial lot, the financial institution will once again research the future prospects of your prospective business. On an average, the minimum amount sanction for commercial land loans is around $150,000 and can max out at two or three times that. A very important aspect of loans for commercial lots is that most of them are offered with a fixed interest rate loan.
As always, conduct your research and make an educated choice when it comes to land loans or any other types of loans that are being offered to you.
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