For business or personal construction, you may want to purchase undeveloped property. If you are short on cash the best way to do this is to take out a land loan. There are different loans you can apply for, depending on if you are purchasing property to build a house or have a commercial property built.
There are three common types of land loans; improved, unimproved, and raw land. An improved land loan is the biggest of the three loans. The benefit to getting one is that you will pay less for your down payment, and lower interest rates, than you would on any other type of land. Improved land is defined as having access to running water, electricity, and public roads. The process for acquiring this type of loan is similar to the process of acquiring a mortgage. However, most lenders consider an improved land loan to be a bigger risk than any other loan type.
An unimproved loan is slightly less risky for the lender than improved or raw land loans. Unimproved land is defined as developed, with access to certain amenities and utilities, but at the same time has no gas or electric meter. To qualify for this type of loan you will need a very good credit score and enough money for a significant down payment.
If you plan to purchase a plain piece of land to have a house constructed on raw land loan is what you will need. In order to get this type of loan you will need to devise a plan for the house you want built. Like with an unimproved land loan, you will need to have a high enough credit score and a large amount of money for the down payment. Expect to pay high interest rates on a raw land loan.
When it comes time to obtain one of these loans, you can get a credit union or bank loan. But your other options include regular USDA loans and USDA construction loans. These are the best loans to get if your income is not large enough to qualify for other loan types.
For more information on purchasing undeveloped property, please contact Bold Growth.