How To Get Vacant Land Financing
With dozens of stunning lots for sale in Okotoks, there’s never been a better time to invest in vacant land. This allows you to create the property of your dreams and build from scratch, with few limitations and pre-existing conditions.
Of course, purchasing vacant land is a significant investment, for which you will likely need assistance in financing. Fortunately, there are lenders willing to support those who see potential in a blank canvas.
Let’s briefly explore the requirements you need to meet in order to get vacant land financing.
4 Steps To Getting Vacant Land Financing
Save Up Your Down Payment
This first step is often the most lengthy one, as saving up money can take time. However, for those looking to invest in vacant land, be prepared to save a little extra; the money required to acquire and develop vacant land is approximately five to seven times the down payment of an existing residential home.
Having the needed funds is known as the cash requirement.
Find A Mortgage Lender
There are admittedly fewer mortgage lenders available when it comes to vacant land compared to traditional residential properties. This is because if the borrower defaults on their loans, they will be forced to foreclose on the land and try to sell it again. However, the location of the land may make it more difficult to resell.
Fortunately, you are able to expand your options and increase your odds of finding a lender by having the necessary property criteria. This proves to the lenders that you are serious about the project and have analyzed the risk that comes with such a development.
In general, lenders like to play it safe; they’re not willing to risk their money if they don’t see resale value or potential in the housing market. By checking off a lot of property criteria, your vacant land will seem more attractive to lenders.
This is known as the property requirement.
Plan Your Project
While it may seem backwards to develop a plan for your property before you even own it, it’s an essential step in procuring financing. Developing a property can be risky, as unforeseen circumstances can bring the project to a halt. You need to prove to your lender that you have the financial resources to support this project and will complete everything on schedule.
Offering this proof is known as the experience requirement.
Finalize The Mortgage
Once you have proven you have put thought and planning into the purchase of your vacant land, you simply need to prove to the lender that you are a credible client. This means that you need to have a steady and adequate income and a solid credit score.
These elements are known as your mortgage requirements.
During this final step, take the time to establish the amount you intend or are able to borrow. This will help you set your budget.
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