A land loan is a loan used for financing a piece of property a business or home owner wants to acquire. This type of loan is normally referred to as a land mortgage. A land loan is typically a loan to purchase land, unlike traditional real estate loans will include the land and the development that you will either construct or already exists. Getting a land loan is a great way for your business to improve your business credit.
When approaching a lender for a land loan, the lender will want to obtain your businesses or personal credit scores, finances and business plans. The higher your credit score is, then more likely you will be approved for a land loan. If your credit score is on the lower end, you will be considered a high risk and you or your business may not be approved for a land loan.
When applying for a land loan, many times the lender will ask you what your plans are for that piece of property. When having a land loan, it will be easier for you as a business owner or home owner to walk away if your finances run into trouble. When this happens, it leaves the lender with a piece of land they will have to loan out again. A lender wants to know they are making a good investment by loaning you money. If your land loan will be used for your business and is tied to use, your risk for the loan will be smaller. The same goes if you are a home owner; you want to purchase the piece of land to build a home.
If you are planning on developing the land for a home a business or something else, you will need to finance that as well. Many times when you are purchasing land, there are stipulations within the community. It may be possible for you to purchase the land, but you may not be able to leave the land undeveloped. You may also have to develop the land within a certain time frame. If this is not done, you may have to pay penalties and fees, thus costing you more money and tightening your cash flow.
Some lenders will want you to put a down payment on the land you want to purchase. This percentage can range from 20 percent to 50 percent; it mostly depends on your credit score and financial history. Try to plan in advance for getting a land loan. The more prepared you are, the easier it will be for you to be approved for your land loan. Also plan for your land loan payment, the more money you have to use as a down payment, the lower your monthly payment will be. When you have extra money to use as a down payment, you may also have the chance to finance your land loan for a lower amount of months or years. Making extra payments will also help you pay off more of the principal amount you borrowed, instead of the interest accruing on your land loan.
Have your business plan ready when you approach your lenders for a land loan. As mentioned above, you have your finances in place and you are ready to purchase the piece of landing you have been looking at for a couple years and it is finally up for sale. It would work perfect for either your business or for your personal home. Having a business plan to show the lender what you are going to do with the piece of property will show the lender you are prepared and ready to start your new venture. You almost have to sell your idea to your lender. Once that is done, you will be able to get your land loan in place.
Corporate Credit Concepts specializes in land loan. For more information about land loan and how it might benefit your business, please CLICK HERE for a free phone consultation.