How To Apply For Land Finance
Buying land property and applying for land loans can sometimes be intimidating, especially if you’re a starter in property finance. But don’t worry. We will walk you through the process of applying for a land loan.
What is a Land Loan?
Land loans are short-term financing where you can buy a plot of land through a lending company or a bank. They are similar to a mortgage but without collateral.
That’s why land loans tend to have higher interest rates and down payments because the eligibility of a borrower depends on their credit history and the value of the plot of land they are trying to purchase.
How does a Land Loan work?
Land loans typically work the same way as a mortgage. You sign a contract with a bank or a lending company, and they give you a loan to purchase your land property. The only difference is that the bank or the lending company gives you the money without any collateral. This is why it’s important to have an excellent credit history and be able to pay it back on time. This all depends on where you will be taking out your land loan, as different institutions or lenders might have different ways of carrying out the payment terms, interest rates, etc.
It’s always best to inquire first before going ahead and applying for the land loan. It’s much harder to make a mistake when it comes to buying property when you understand the process and the terms of the loan taken.
How to apply for a Land loan?
Applying for a land loan is similar to that of a traditional mortgage. However, the qualifications are stricter. Your qualification as a borrower depends mostly on credit history, but few things to consider. Below are a few things you should take to apply for a land loan
1. Preparation
Applying for land loans or mortgages, in general, requires a good credit score. Therefore, before using, review your financial information (including tax returns, financial statements, and payslips), credit score, and other possible paperwork to avail of the best loan terms.
2. Know your costs
Before even looking for a plot of land to purchase, you must consider how much you can afford. Calculate your current budget and expenses to evaluate the amount of monthly loan payments and outgoing funds that can be paid within the allotted time of the loan.
3. Prequalification letter
When you’re done with the above steps, get a prequalification letter from the lender stating that they are willing to lend you money. This will tell land sellers that you are a qualified buyer.
4. Look for the perfect area
Now, visualize the perfect home that you want to build. Jot down every possible characteristic you would like in your home. With that in mind, select a good area that you can create your home into.
5. Complete paperwork
Remember the prequalification letter? To complete that, you should submit your documents such as employment certificate, residency, etc. This step can be tiring and will probably take longer than expected.
6. Apply for a land loan
There are three types of land loans you can apply for, namely: raw land loans, unimproved land loans, and improved land loans. Raw land loans are mainly used in areas that are undeveloped with electricity, sewage, and roads.
Unimproved land loans are similar to raw land loans but more developed with utilities like water supply and roads. Lastly, improved land loans are commonly used to develop areas with access to water, electricity, and roads.
However, improved land loans are much more expensive than the other two since they are the most developed. The good thing is that improved land has much lower interest rates compared to the other two.
Apply for your chosen land loan with the plot of land in mind. You can also ask your lender for other things that are needed to apply. Make sure to approach reliable and experienced lenders like https://www.loancorp.co.uk/ who specialize in helping people buy land, develop new properties and everything in between.
Enquire Today About Getting a Land Loan
When you’re ready to apply, be prepared to answer questions.
You may be asked how much money you want to borrow, how much time you want their help (term length), your employment and income information, personal information, among other things. Also, make sure that you understand every detail of your loan to avoid problems in the future.
Reach out to us for guidance on getting land loan finance today.