Buying Land? Consider These Factors First
Amid the coronavirus pandemic, more and more Americans are choosing to move away from big cities and towards suburban or rural areas. In a survey conducted by the Harris Poll, nearly 40% of U.S. adults living in urban locations considered moving away from densely populated areas. Among the real estate options that some have considered were buying land and building a house.
Factors to consider when buying land
Whether it’s raw land, unimproved or improved, buying land without an existing house means you need a land loan.
Land financing is different from a typical home mortgage as there is no home to act as collateral for the loan. Due to the lender’s risk exposure from the lack of collateral that an existing house would give, getting a land loan is always more complicated.
Land loans are also likely to have less favorable terms than a mortgage loan. Depending on the lender, there may be a substantial down payment and higher interest rates. Additionally, some land loans have shorter repayment terms than a 15-year mortgage or 30-year mortgage.