For some, acquiring land is the ideal situation. When you own a plot of land, you’re free to hunt, camp, or even build on it. But when it comes to purchasing that land, you may need to secure a land loan to finance the property. Before you apply for a land loan, you should thoroughly understand everything about how they work. To help guide you, we’ve outlined what you need to know about acquiring land loans.
Who Should Consider a Land Loan?
When it comes to purchasing land, there are multiple financing options, leading to some confusion about loans. For instance, people often mistake construction loans for land loans, but those are for people who want to start building immediately. Land loans are a better choice for individuals using the property for a purpose other than building, as well as those planning a construction project further down the road.
Types of Land Loans
The type of land you want to buy determines the loan you should seek. Knowing the features of the area you wish to purchase land is crucial as it impacts the overall accessibility and cost of financing. The most common land loans include:
Raw Land Loans
Raw land refers to areas with no electricity, roads, or sewers nearby. The undeveloped nature of raw land makes it challenging to obtain financing at times. This type of land loan may be best for hunting or farming as it’s not easily developed for housing. Having good credit and increasing your down payment will also boost your chances of acquiring a loan for any land type.
Unimproved Land Loans
Unimproved land is typically more developed and has some access to utilities, making it less risky than raw land. However, it may still lack electric meters, natural gas meters, and phone boxes. Community West Credit Union offers this type of land loan and can finance up to 20 acres of land to build your dream home or to use for agriculture.
Improved Land Loans
Improved land loans are generally high developed plots of land. These areas can be more expensive since they have access to water, electricity, and roads, but are often easier to get financing for compared to raw or unimproved plots.
How Do Land Loans Work and What Do Lenders Expect?
Once you decide to take out a land loan, the first step is to complete an online application. If you’re pre-approved, our lenders will determine how much land you’re able to finance. Similar to mortgages, land loans require down payments to provide the lender with security in their investment. As with any loan, a good credit score will increase your approval odds.
To apply for a land loan, you’ll need the following documents and information:
- A current, government-issued photo ID
- Annual or monthly income information
- Employment information
- Current mortgage or rent payment information
Apply for Land Loans at Community West Credit Union
If you’re ready to build your dream home or develop the land you’ve been dreaming of, get in touch with Community West Credit Union. We offer land loans with 10 or 15-year terms and fixed rates for predictable payment amounts. As a member-owned organization, we deliver more personalized service at better rates. Your financial needs always come before our profits and our products are designed to work for you. Contact us today to learn more about how land loans work and discover the credit union difference in West Michigan.