If You Want to Buy Land Here are 6 Things You Need to Know First

Are you itching to buy a piece of land? You’re not alone; the desire to own land springs from deep within the American spirit of adventure and creativity. Very few real estate endeavors are as satisfying as putting your mark on your land. Keep reading for six essential things you need to know before you buy property.

The Difference Between Raw Land and Improved Land

The most critical choice you’ll make is what kind of property you want to purchase. Do you remember learning about the pioneer homesteaders back in history class? Those pioneers purchased raw land. Raw land is the property that hasn’t had any improvements, such as water and sewage, installed.

Improved land usually has things such as electricity, water, sewage, and telephone capabilities added to it. An advantage of buying improved ground is that you won’t have to pay to install the essential services.  

There are positives and negatives to purchasing both types of land. For instance, raw land often comes with a less expensive price tag. However, the cost of installing utilities can dwarf any money saved in the initial purchase. On the other hand, perhaps the awe-inspiring views on a desolate parcel of land seize your imagination and make the extra cost of developing raw land feel like a bargain.

Assess your comfort level when it comes to risk and dealing with unknown variables before you choose the type of land to buy. One of the significant variables that you’ll need to consider before purchasing property is what the local government allows you to do with the area; otherwise known as zoning.

Zoning Controls Land Use

Did you ever wonder why businesses tend to cluster near each other within a community? What about the height restrictions on buildings in a historic area? Local governments regulate the use of land in their area through zoning laws. The zoning laws vary tremendously in different regions, so it’s crucial that you understand how zoning laws impact property that you’re considering before you buy it.

Typical types of zoning include:

  • Commercial (businesses)
  • Industrial (factories)
  • Rural (farms)
  • Residential (houses)

Along with telling you how you can use the property, zoning laws can dictate the appearance of any building. For example, zoning laws might require that a new house fit in with the 1920s brick bungalows on its street.

Financing a Raw Land Purchase

Prepare to pay a significant amount of money up front. Unlike the home loans that are available for low down payments, lenders typically demand a substantial down payment on land purchase loans. Depending on the type of land, lenders often require upfront commitments ranging from 20-50% of the purchase price.

Lenders are leery of loaning money for raw land purchases because the risk of loan default is higher than with improved land. The wary lender compensates for the default rate by demanding substantial down payment money and charging higher interest rates than with a developed land loan. Improve your chance of getting financing by using the following tips.

  • Maintain a high credit score and decrease your debt.
  • Put down a hefty down payment.

Financing Improved Land

Lenders are less concerned that a buyer will abandon a land loan when the land is ready to build on at the time of purchase. You’ll experience much less lender scrutiny if, for example, you want to buy a finished lot in a housing development, because the lender assumes that you’ll construct a home on the lot within the next year.

However, buying a vacant lot is never as simple as obtaining a home loan, so come prepared to prove to a lender that you are a well-qualified and knowledgeable buyer. In addition to an excellent credit score and healthy finances, impress your lender with building plans for your proposed land purchase.

Construction Loan

Most likely, you want to build something, such as a house, on the parcel of land. It’s possible to get a loan that covers both the purchase price and construction costs for the property. In fact, many lenders prefer to fund both endeavors through one loan because developed land is worth more to the lender than undeveloped land.

The lender must approve the construction plans and the building contractor before it will give you a loan. Unlike a home loan where you get all of the loan money in one sum, the lender usually distributes the money in a construction loan over time.

It’s important to remember that construction loans are short-term loans. You can probably convert it into a regular 15 or 30-year mortgage once construction ends.

Homes for Heroes affiliate lending specialists are committed to locating outstanding home loans for Heroes. Along with finding exceptional financing opportunities, our affiliate lending specialists save you money through reduced lending fees. SIGN UP and we will connect you to a local Homes for Heroes affiliate lending specialist in your area.

Invest for the Long-Term

People covet land because there is a finite supply and it isn’t going anywhere. Purchasing land is an excellent investment, and you can be confident that the value will go up over time.

Of course, some land appreciates faster than others. Experts know that the key to investing in property is to choose land that is well-located and capable of being developed. A real estate specialist with expertise in vacant property can guide you throughout the land search so that you make a wise purchase. A Homes for Heroes real estate specialist will be able to provide you expert advice about buying land in your area.

Now is an excellent time to embrace your adventurous spirit and invest in land. Preparation is essential to tackle the unique challenges of buying vacant property. Equip yourself by putting yourself into a strong financial position so that you’re able to pursue outstanding loan opportunities. Educate yourself to understand the perks and cons of potential property purchases.

Our Homes for Heroes real estate professionals look forward to sharing in your adventure by helping you find a property that best fits you and your family, while maximizing your savings along the way. 


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