Various Options for Financing Land

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Various Options for Financing Land

1. USDA Loans

For those who want to build their homes in rural
areas, the U.S. Department of Agriculture has
financing options. Section 523 loans from USDA
are available to those who want to buy land for
development. Section 524 loans can be used to
finance construction by contractors. These loans
do not require a down-payment and have
low-interest rates. They must be repaid within
two years. Section 523 loans and Section 524
loans were created to assist low-income families
in becoming homeowners. They are subject to
zoning restrictions and land-use regulations.
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2. FHA Loans

• FHA loans are a loan that allows you to purchase
  land and build your home on it in a very short
  time. FHA loans are loans that have been insured
  by the Federal Housing Administration in order to
  protect lenders against risk.
• FHA loans can be used for land purchases only.
  However, they are sometimes combined with
  construction loans. FHA loans do not require a
  large down payment, unlike conventional loans.
• To compensate, interest rates might be higher.
  Even if you have declared bankruptcy or suffered
  foreclosures you may still be eligible for an FHA
  loan.

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3. Home Equity Loans
Home equity loans are available to buyers who own
a property but have no or little debt. Home
equity loans can be used to turn your equity into
collateral to secure a loan to finance your
purchase. There are many types of Home Equity
Loans. Learn more about your options by
contacting your financial institution.

• 4. Cash-Out Refinancing

Refinance your home to get equity. This is
basically paying off your existing mortgage to
obtain a new mortgage with a lower rate of
interest or simpler monthly payments. Your
financial institution will issue you a check
based upon the equity in your property after the
remortgaging process has been completed. This
cash can then be used to buy land.
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5. SBA Loans

• The 504 loan program, which is offered by the
  Small Business Administration (SBA), could be of
  benefit to business owners. The SBA would finance
  10, while the lender would finance 50. The
  terms of these loans will vary depending on which
  lender you choose to finance 50.

6. Seller Financing
Sometimes, you may be able to get financing
directly from the landowner. Seller financing
requires substantial down payments and generally
lower interest rates. Seller financing will cost
you more than financing through the bank. This
type of loan is not recommended if you aren't
eligible for traditional financing. To avoid
unnecessary stress, make sure you carefully
review the terms and understand the fine print
before you sign anything.