LAND LOANS: 6 Things You Should Know

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If building a house is on your mind, then getting a land loan is as well.

A land loan is one of the ways that you can make your dream possible.

In this video, we’ll go over the top things you need to know about land loans and how to apply for them.

Let’s get started.

Disclaimer: we are not lawyers, accountants or financial advisors and the information in this video is for informational purposes only. This video is based on our own research and experience and, while we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment or purchasing decisions.

Partial Transcript

Hi guys this is Erika from Gokce Capital. Now, before I begin, be sure to subscribe to our Youtube channel and turn on notifications.

In 1846 the descendants of George Washington reached out to the federal government with an offer to sell his estate for a hundred thousand. The federal government refused although the army did offer to acquire the property for use as an asylum for disabled soldiers, insulted the descendants then doubled the asking price after the government turned down the purchase offer. A few developers proposed purchasing the property in order to develop a hotel outraged a group of prominent women created the Mount Vernon Ladies Association of the union and borrowed money from the State of Virginia to purchase the property. They then charged a small admission fee to repay the loan. Yet shortly after the civil war broke
out and it looked like the grounds were in danger of becoming a battlefield.

So how did Mount Vernon survive? I’ll let you know at the end of this video. But while not strictly speaking a land purchase, the unique way in which the acquisition of Mount Vernon was financed is very similar to the non-traditional tools that are often used to finance vacant land purchases. Now, if you've watched some of our other videos you may notice that I often
mention how difficult it is to find financing for the purchase of raw or vacant land. But there are land loans out there and in certain circumstances you can take advantage of them when you purchase raw land. So if this is what you are planning on doing, in today's video i'm going to go over six of the top things you should know about land loans.

First of all a land loan as the name would suggest finances the purchase of a
plot of land but in certain circumstances it can also finance the construction of a building. When this is the case it is usually called a construction loan.

Number two
There are several kinds of land loans. There are lot loans which are usually offered to folks who are looking to purchase land in order to build. Then there are land loans or alternatively recreational land loans which tend to be products that provide financing for the purchase of
recreational land such as hunting, fishing or forest land. And as I mentioned earlier there are also construction loans which can fund both the acquisition of a property and the construction of a building on it. And then there are farm loans. This is a very broad category and there is a whole agricultural finance industry but a number of agricultural finance institutions do provide loans for the acquisition of land for the purpose of growing crops or ranching.

Number three
Outside of the agricultural finance industry construction loans tend to be more common than land loans especially when one is purchasing land for the purpose of building a home. There
are also a wider range of institutions including conventional banks that will provide construction loans and this is because both FHA and USDA back construction loans so long as the borrower meets all their requirements. But there are a few different categories of construction loans that fall under two primary umbrellas: The first are construction to permanent loans and these are construction loans that will convert to a permanent
mortgage once the building is constructed, thus you won't have to get a second loan after the construction is complete. These tend to be structured as interest only during construction and then principal plus interest after conversion. The construction to permanent loan has a number of advantages but the biggest one is that you only need to apply for a loan and pay closing costs once. Having said this there are also construction only loans as the name would suggest. This is a loan that is short term and which covers the construction period only, thus you would need to get separate financing at the end of the construction period so you'll need...