Best Rates on Lot and Land Loans Arizona
There are affordable land loan options in Arizona. You’ve finally found that piece of land you’ve been searching for. It can be a perfect getaway spot or you have some commercial plans for it. Either way, it’s poised to be a good investment. You are now ready to purchase it.
What comes next? It’s obvious- you get credit from a land lender. What do you need to do to get it?
Most people are familiar with home mortgages, but find themselves at a loss when it comes to land loans. How do you go about getting the funds to purchase that tract of land? Here’s what you should know.
Factors that Influence your Land Loan in Phoenix, AZ
The type of loan you get largely depends on 2 things: the property, and the plans for the land, especially your timing for the construction. The first part is about the valuation of the land. This is basically its worth according to the current market rates.
It’s beneficial to get the property professionally surveyed. A survey will identify issues such as property lines and dimensions, and any easements and access. The access and easements will influence the value of the property. Hence, they’ll affect your ability to get the loan.
For the second part, before providing financing for your purchase of vacant land, the lender needs to understand what you plan for the property. Details about the property and your plans will influence the amount of risk the lender is willing to take to give you that loan.
Be sure to check with local officials about the area’s zoning. You may want to build in an area that has not been zoned for development. If that is the case, you’ll need to seek for a zoning change in order to meet your needs.
Typically, the down payments and interest rates for land loans are higher than for mortgage loans. Why? The land loans more risky for foreclosures, as the property (which is usually the loan’s collateral), won’t be used for housing, at least not in the near term. Hence, it’s easier for the owner to just walk away and leave the lender stuck with the piece of land.
The Certain Types of Land Loans in and Around Maricopa County Arizona
Generally, there are 2 types of land loans:
- raw land loans
- improved property loans
Raw land is unimproved land that has no plans for improvement, like sewers, utilities and streets. It’s the toughest kind of property to secure a loan for, since it’s literally a speculative investment. In case you don’t have immediate plans for the property, you will still be required to pay annual property taxes.
Raw land loans typically have higher down payment requirements and higher interest rates than the improved property loans. You’ll find it easier to borrow from a local lender who is familiar with the property. Many lenders treat the raw land loans as commercial loans.
Getting loans for improved property is easier and faster. In fact, loans for land that’s purchased with immediate construction plans are the easiest land loans to obtain. This is as the lenders tend to be paid off when a mortgage is secured on the structure.
Steps You’ll Need to Take:
Do your homework. Visit the lender, check out their website to familiarize yourself with issues such as their programs, interest rates and collateral requirements. Check your credit report, and if there are any negative issues, sort them out before visiting the lender’s offices.
Next is negotiating your deal and signing the contract. You’ll need legal description of the property, and your credit report. Other information usually required by land loan lenders is the completed loan application, a financial statement, plus a copy of your last 3-years federal tax returns with W-2’s.
The land loan lender will evaluate all information that you have provided. If the deal is good, an appraisal of the property will be ordered for by the loan officer. After the appraisal, the loan package will be completed and submitted for approval. All that will be left is a closing the loan with an attorney, which will be set up by the loan officer.
Tips on How to Find the Best Rates and Deals in Phoenix, Scottsdale, Tempe, Mesa, and other AZ Communities
Now that we’ve covered that bit, no doubt you’ll want to know how to land a hot land loan deal. After all, there are many options out there, and all claim to be the best. Choosing a loan can be a confusing and time consuming process.
If you make the wrong selection, you’ll be stuck with a product that will cost you more than it should. How do you know which one works best for you? Follow these 4 tips:
1. Work with the Professionals
When looking for a suitable loan option, you basically have 2 options: One, you can go through different lender websites, check out the latest deals, and compare to find the best. Unless you know your way around these waters, its best to seek out the professionals. You don’t want to be a meal for the loan sharks.
The second option is to use a land loan broker. You can let them do the research for you. A professional land loan broker will ask you all about your goals and objectives. Then, based on your needs, they will recommend the product that’s most suitable. Whichever path you take is up to you, and your financial goals.
2. Do you want a package or a non-package loan?
A package loans saves you hundreds of dollars annually in fees. Alternatively, you can go for a stand-alone land loan product, which can be faster for you to set-off. It’s similar to what happens for mortgages. However, this depends on your financial position. Do the math, and seek out which one works best for you.
3. Check out the lender’s fixed rates
Fixed rates come with consistency and stability in repayments. However, they also com with restrictions, such as how limiting your extra payments each year. If you’re drawn to fixed land loans, check with the lender and find out what their specific policy entails.
4. Do not just settle for low interest loans
Be very careful on this one. Lower loan rates do not always mean a better deal. All you have to do is compare overall fees vs. overall savings. Consider both aspects when selecting the best lender and product for your specific needs.
Securing land loans without a plan will be difficult. The lender needs to understand the story behind the property and what your plans are, before they become willing to lend. That’s why land loans are usually called “story loans”. To secure that loan, ensure you get your story straight.