We weren't planning to even look into buying land untill fall/winter, but then some raw land (people don't homestead here, so "raw" is a four letter word) just came on the market at a larger size for cheaper than the norm and we're thinking. So, what do I need to know about land loans in the current market? Things haven't crashed here. I think there has been maybe a 5% drop in price, if that, but properties are starting to sit on the market longer.
Anyway, wondering about down payments (the less required the better for us), how long it takes to close, what are interest rates like, monthly payments, what kind of credit you need, is it worthwile to go with someone like buildmax/owner-finance to get the land and building money all at once (we'd only be looking at about a $40,000-60,000 total loan ammt. with the two together --new construction here is well over $200/sq ft right now so sweat equity would not be a problem in the end), etc, etc?
We do already have a fridge/freezer, upright freezer, 4 x 8 picture window, some small stainless sinks, a range/oven and a nice (yet kinda small) wood stove.
I guess our biggest hang up would be the down payment (that's why we were waiting till fall/winter --we still may be), total income, and credit. Our credit score is around 650 or so right now despite having paid off all our debt this year on a significantly lower income, we gross about $32,000 a year but dh also just got a $2.50/hr raise starting this paycheck...
Would a credit union be our best bet? Suggestions? Thanks...
My experience has been that banks usually want 50% down on raw land and they often apraise it at well below market value so you may have to go above 50% if they do. Unless you hire a builder you are unlikely to get a construction loan. Sorry for the bad news but thats generaly how it goes down. You might ask the owner if they are willing to owner carry the land payment. G/L
The owner financed mine. He wanted 10% down and 10 years of payments @ 7%. That is fairly common in this area of Alaska. Of course, if I default, he gets the land back and we go to court over any improvements.
Mike
The credit union wants 25% down, 7 years max term and about 9% interest at our credit score. Gotta love it! Maybe we can buy some of the DNR land that is offered through the state on Prince of Wales Island at a good price...the problem is just that we don't live there! Our dream ;D
It turns out that while the land that was only $21,000 was definately worth it, it wasn't worth it to us because we ARE doing the work ourselves. There's no way in heck I'm going to pay to bring in that much rock, etc, to level out a hillside.
Heh, so if we just paid off all our debts our credit score would hopefully go up, right? We still have two credit cards for now.
That's a better deal than we'd found. We went with Farm Credit Services.
We had to put about 50% down once all was said and done because, as Scott pointed out, it appraised below market value.
On the bright side, as our entire 40 acres was only $16K, we only had to pay $8K...
You got 40 acres for $16K ???!!! :o Drewl...
I used capital farm capital, about 3 years ago. They were very upfront and honest in their dealings. The neighboring properties were in the 5k-7k per acre range and I got mine for ~4k an acre. I paid 20 percent down, 8% 20 year fixed. They offered a 30 fixed as well. I paid for the survey, and they paid for the appraisal. (It appraised above what I was paying and I think that helped alot with the deal). I also paid a few hours of a lawyers time to help sort out the mineral rights as their was a bunch to work through.
Quote from: akemt on May 26, 2009, 10:36:15 AM
You got 40 acres for $16K ???!!! :o Drewl...
Yeah, and there are those who think we paid entirely too much. ;)
Cost of living is pretty low in this part of the world. Of course, the
standard of living is pretty low, too. lol
Yeah, but Erin, we've had it both ways and I'll take my "low" standard of living ANY day over what it cost us to live in WI. Oklahoma and Kansas are pretty reasonable when it comes to land.
Akemt, we checked into land loans and eventually bought the place with an existing house because on land the minimum DP we could get was 50%. We also looked into a 40 acre place, beautiful, with two small manufactured homes set on foundations. However, they wanted 40%-50% down on it AND the interest rate was something like 11%!!!! :o It didn't matter that our credit is perfect... it had to do with it being "manufactured" homes. And, furthermore, we would have sold one of the homes off ASAP to be moved and lived in the other one while we built, but that didn't matter, most lenders wouldn't even consider financing on that much land with a "manufactured" home... they would come nearer lending us money on the same land empty or the same land with a crappy stick-built house, which doesn't make a lick of sense to me. The house we got was somewhere along the lines of our third choice, but now that we're here, I wouldn't change it. You cannot do FHA loans on more than 10A right now. (I guess at some point in time, they used to, but now it is hard to get even a conventional loan on anything more than 10, especially without paying a handsome sum down.)
Well, sadly, there's no such thing as 10 AC here anyway. You're lucky to find something around an acre in size. When I say we're planning to homestead, I mean in the small sense! ;) Chickens, year-round greenhouses (attached, I'm thinking), goats eventually, and maybe something that makes wool down the road. We're new to this so we'll see how it goes.
You could always do Angora rabbits...they don't take up much room and are pretty easy to deal with, not to mention, they make a lot of fertilizer for your garden. Ok, now that I know you're dealing with a smaller acreage in mind, you should be able to get a loan on that much land, but it will probably still be a larger percent down just because there isn't a house on it yet. How much do they want per acre? Credit unions are usually worth a shot, and a lot of times they're better on interest rates, etc. We always did our car loans through the credit union because the interest rate was really low and we were able to pay them off really quickly. If you have a choice between one and two acres, I would go with the larger one... I doubt you will ever regret buying too much land, whereas if you buy a place that is too small, you're bound to have regrets.
Also, check with some of your smaller, local banks about loans. We found out that they were very competitive with the big lenders, and sometimes even better. They will require far more from you in regards to proof of income, etc, than the big banks will, though.