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Tuesday, February 24, 2009

How To Find Land Loans

By Spencer Hall

Many people see a piece of land and think of the different things they could do with it. Some want to build while others think that they could speculate and sell it in a few years for a profit. If this is you then we can help tame your expectations.

Banks prefer to loan money to already finished property or to very well laid out plans. If you are buying raw land and have not done your homework then there is a good chance that you get denied. If on the other hand you have put together all the research and proposed it well then you will likely be given the loan. Banks like safety and if you can not show how your project is safe then they will likely deny your request.

In addition to the fact that it is raw land there are a lot of other variables. One of the bigger variables is what type of land it is. If it is farm land that has yet to be farmed then it is going to cost a lot more to finance then if it is an empty lot right next to a thriving development.

If it is raw land that is not even hooked up for sewage and electricity then the bank will want even more money to finance the project. This is again because of the risks involved from the lenders perspective.

Make sure that if you are developing raw land you get a staked survey done and that you know for sure if you can get the required permits and utilities that you will need later down the road. If you have plans to immediately build on it you will have an easier time getting it then if you want the land for pure speculation.

When it comes to financing the project you may be amazed to learn that home equity loans are usually cheaper then a direct loan. Why is this? Mainly because you will work harder to keep your home than to keep an empty parcel of land. Remember that banks love certainty.

A land loan can typically be for anywhere from one to about fifteen years long. That is because the bank does not like financing projects out thirty years. Thirty years is a long time and brings in a lot of uncertainty.

If the land is owned and held as an investment then you may be in luck. Many times the interest involved in land loans is tax deductible. And as we know anytime we can save money from the IRS is a good time.

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