Colorado: a state filled with awe-inspiring stretches of land with the Rocky Mountains lining your horizon. What a dream it is to own land in this state. When you get ready to purchase your dream property, land loans are one of the most popular financing options available for potential buyers. Land loans, however, are different from a regular mortgage, and knowing the differences makes the process of applying for a land loan go more smoothly. As a realtor who specializes in land, ranch, and horse properties in Colorado, we know the ins-and-outs of getting approved for a land loan. That’s why we’ve created this guide to help you understand everything that you need to know before you talk to a lender.
What is a Land Loan? Why are they Different?
Unlike a home mortgage, land loans are a type of credit used to purchase land that you do or do not intend to develop. Land loans apply to property that has not yet been developed. Because of this, land loans are considered much riskier for lenders. Because the collateral is the land itself, lenders often worry about buyers dropping payments. Similarly, it can be difficult to sell the property because, again, the market for homes is stronger than for land. Because of these reasons, land loans often have higher interest rates or shorter payback periods,
Types of Land Loans
Lenders, knowing the difficulties and the risks, can often compensate for the risks by being aware of the different types of loans. Depending on the land you want, if you intend to develop it, and the location, different types of loans may apply to you. For example, raw land loans are more difficult than developed property, while government assistance loans can add to your credibility as a buyer. Knowing the types of loan will ensure that you get the best for your land, even before you apply for the loan.
Process for Applying for a Land Loan
While the loans can vary, the process of land loans are mostly the same. Being aware of the process before you apply will help you plan and budget for your new property. For one thing, getting pre-approved before applying makes your application much stronger, increasing the chances of a lender picking you up. Another way to stand out as a purchaser is having a large down payment. Although most land loans already require a down payment of 20-40%, having additional funds available will help your application. Once approved, something else different in the process is closing time. In contrast to home mortgages, land loans have a longer closing time.
Plan Ahead for a Land Loan
Despite these differences, land loans can be more than manageable with the proper planning and budgeting. Before applying for a land loan, make sure you inspect your budget to plan for the down payment and interest rates. Additionally, it’s a good idea to plan what you want to do with the land. Will you be developing it? Has the land been inspected? Does the zoning code need to be modified? How will you get water on the property? One way to help with planning is to find a real estate agent who knows the surrounding area. At Properties of Colorado, Catherine Brown-Swain is an expert in land realty. When we view property, we keep all of these factors in mind as we search, that way you are aware of everything right from the start. Meeting with a qualified agent like Catherine early-on can help you figure out the important details so that the entire process goes smoothly.
View Land for Sale in Colorado
Having a real estate agent who specializes in land is essential as you embark on this journey. You want to make sure that your representative is knowledgeable and educated in the different facets of land, loans, and your property goals. If you’re looking for the best real estate agent to help you navigate purchasing property, contact Catherine Brown-Swain at Properties of Colorado for more information. You can also view available and featured listings right on our website.
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