![]() ![]() While any parcel of land has some intrinsic value as a real asset, you are much more likely to be approved for a loan if you can show that it also has value as an investment. The most important of these is the land itself, its location, and how it will be used. There are a number of variables that can influence your financing options when buying a piece of land. Banks also tend to charge a higher rate of interest to offset the additional risk. Consequently, land loans can be more difficult to obtain, particularly if you don't have a definite plan in place to improve the property and increase its value. People are much more likely to walk away from a land loan than a mortgage, potentially leaving the lender with an unimproved parcel of land which they will have to sell to recoup their losses. Undeveloped land, on the other hand, doesn't deliver the same degree of investment security for the creditor. Moreover, a house on a lot has greater value on the open market, and makes for a more secure form of collateral. Borrowers are much less likely to walk away from a home loan, particularly if the property is being used as a primary residence. But a short primer should help you understand how land loans work, and what your options are when looking for a lender.īanks and other lenders tend to view land loans with a wary eye, and consider them to be more of a risk than a standard mortgage. If you've never purchased land before, you may find the process a bit more challenging than you expected. ![]() Land loans are unique financial products, and they are handled differently than mortgages and other secured loans. But borrowing money to purchase raw land is not quite that straight forward. Unless you're in a position to pay cash up front, you'll need to borrow some money to finance the purchase. To learn more about relationship-based ads, online behavioral advertising and our privacy practices, please review the Bank of America Online Privacy Notice and our Online Privacy FAQs.Everything You Need to Know About Land Loansīuying a parcel of land, either as a long term investment or on which to build a new home, is not quite as simple as you might think. You may also visit the individual sites for additional information on their data and privacy practices and opt-out options. To learn more about ad choices, or to opt out of interest-based advertising with non-affiliated third-party sites, visit YourAdChoices popup powered by the DAA or through the Network Advertising Initiative's Opt-Out Tool popup. Ads served on our behalf by these companies do not contain unencrypted personal information and we limit the use of personal information by companies that serve our ads. Relationship-based ads and online behavioral advertising help us do that.īank of America participates in the Digital Advertising Alliance ("DAA") self-regulatory Principles for Online Behavioral Advertising and uses the Advertising Options Icon on our behavioral ads on non-affiliated third-party sites (excluding ads appearing on platforms that do not accept the icon). We strive to provide you with information about products and services you might find interesting and useful. We’ll keep you informed about cash to cover prepaid expenses for your new loan and property. In some cases this may include flood, earthquake or other insurance coverage as well. You will also need to provide the initial premium for your homeowners insurance policy. Depending on when you close your loan, some of this property tax is typically due at the time of closing and calculated as a prepaid amount. The local county tax assessor’s office can give you the rate for your county. You pay this tax annually, semiannually or as part of your monthly mortgage payments (escrow). The specific percentage varies dramatically from county to county in every part of the country. Property taxes are a fixed percentage based on the tax assessor’s appraised value of your home that you pay to the county in which the home is located. Once your closing date has been selected, we will be able to provide you with the exact amount of prepaid interest required for your loan so you can plan accordingly. It covers the interest that accrues on your loan from your closing date until the last day of the month. Prepaid interest varies depending on which day of the month you close. Prepaid interest represents funds for the initial payment of interest on your loan.
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