Buying real estate is a huge commitment for just about anyone and it can be quite pricey, but is it easy to buy land?
Buying land is easy if you have the savings and financial stability to buy it upfront. However, buying land can also be done relatively easily if you can qualify for a loan from a financial institution or are resourceful enough to take advantage of some home loan programs.
For most people, buying land is the biggest financial decision that they will make in their entire lives, which puts a lot of pressure on aspiring homeowners to make the right choice. This can be challenging sometimes given that land acquisitions are quite dynamic and can be achieved in a number of different ways. These days, we have more options for buying land available to us than we ever have in the past, but you want to be careful. While we do have a lot more options for buying land, there is also a lot more financial risk and often prerequisites involved to actually make it happen. To help you understand this better, we are going to break down the different ways that you can make buying land easier.
After decades of working as a real estate investor, I have had a lot of in-depth experience dealing with land acquisitions. I have concluded that buying land can be done easier when you utilize all of the right resources available to you.
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If you are feeling the pressure that comes with buying land, you are not alone. Most people that are on the real estate market for the first time and have never dealt with land acquisitions or land loans before are often overwhelmed by the financial responsibility and requirements that come with buying land - and for good reason. There is a lot tied into buying land and you want to make sure you are fully aware of what you are committing to before you start signing any contracts.
Before you begin evaluating properties, the first thing that you want to do is consider your personal finances so that you can find out what your budget is. Financial planning is essential when buying property and a failure to do so can result in you biting off more than you can chew. The best way to do this is to sit down and carefully calculate exactly how much savings you have and what your long-term income will be. You should, ideally, weigh out what you currently have to put down on your land purchase and how much job security you have for the foreseeable future.
Calculating your finances and creating an organized budget can be challenging at times - especially if you have never created a financial plan for buying real estate before. If that is the case, you may want to consider seeking the help of a financial advisor to help you formulate your budget. This way you can determine exactly what you can afford so that your land search is narrowed down and financially realistic.
However, if you are financially well off and have a considerable amount of savings in the bank, then you will find that buying land is quite easy. You should still consider what your budget is for the land that you want to buy but, ultimately, you can rejoice in not having as much financial pressure when starting your search. After you have searched for properties and found a piece of land that suits your tastes and your budget, the only thing you really need to do is commit to the parcel and begin signing contracts - at which point you will be handed over a deed to the land, as well as the keys. However, most people are not in this position and generally need to seek financial assistance when buying property. Let’s take a closer look at the different ways that you can buy land.
The most traditional and practical way that you can buy land is through a mortgage. To do this you will need to seek the assistance of a financial institution to lend you the money that you need to buy your property. While mortgages are incredible options for many aspiring homeowners, they do need to be approached with caution given that there can be quite a bit of financial risk involved with committing to such a huge loan.
If you are leaning towards getting a mortgage, you should be aware that there are a number of different options for these land loans and they can vary in their terms and conditions. What you want to pay attention to are the interest rates tied to the mortgage contract, as well as the amount of money down that you need to qualify for the loan. In addition, you should understand what your credit score is - given that this will greatly determine whether you qualify for a mortgage, but also, it will often influence your interest rates and your money down amount. You should have a credit score of at least 600/620 to qualify for just about any mortgage.
These days, the industry standard is to get a mortgage contract that binds you to a 30-year payment plan. However, you will find that there are options with banks that offer timeframes as short as 10 to 20 years. The majority of these mortgages will require that you put down at least 20% of the value of the loan in order to qualify - with an interest rate of roughly 2.5 to 4%.
If you do not have the financial backing to put 20% money down on your mortgage, then you can always opt for a mortgage that is 5 to 10% money down (or even less) - with some options being available that require zero money down to qualify. These will normally be available to people with good credit, but you should approach these mortgages with caution. The reason for this is that the less money down that you put on your mortgage, the higher you can expect your interest rates to be.
With that being said, if you have the credit score to qualify for a zero or low money down mortgage, then you will find that buying land is actually quite easy - given that you are essentially given a loan that can put you into a new home almost immediately.
USDA Home Loan Program
Going with a traditional mortgage is simply too risky and too expensive for some consumers, which is why some people opt for alternative loan programs to make buying their land easier. There are quite a few home loan programs available to you out there but few come close to the USDA Home Loan Program. The United States Department of Agriculture primarily deals with farming and agricultural matters but, to most people’s surprise, they also deal in real estate.
For decades the USDA has been helping people buy affordable homes at a fraction of the price of normal real estate options with fewer strings attached compared to traditional mortgages. The USDA Home Loan Program is a phenomenal resource for lower-income families and individuals to utilize. In order to qualify, you need to meet the USDA’s credit requirements, be a citizen of the United States, and also prove that you meet their income requirements.
The great thing about the USDA Home Loan Program is that you do not need to put money down in order to qualify for the loan. This means that if you meet their essential requirements, you can have the opportunity to buy land very easily. In addition, the USDA Home Loan Program has some of the best interest rates that you could ever hope to find - with a current rate of just 2.5%.
The main catch with the USDA Home Loan Program is that you are bound to live in a specific location. The USDA is trying to encourage more people to live out in the countryside in areas that are more rural. This can be a defeating factor for many people that want to live in a city. However, if you are not location dependant on the land that you buy, you will find that the USDA Home Loan Program is going to be one of the easiest options available to you.
If you are not interested in living in a rural area and want an alternative that is pretty much just as good as the USDA Home Loan Program, you should consider an FHA Loan. For years, the Federal Housing Administration has been offering some incredible loans to people that come with some very lax financial requirements.
FHA Loans are great options for people that do not have the financial stability to put a lot of money down on land. This program requires that you only put down as little as 3.6 to 10% on the land that you want to buy, which is usually determined by your credit score. In addition, you can be seeing interest rates that are as low as 3.5%. You will also find that the credit score requirement to qualify for an FHA Loan is very reasonable at just 580.
However, in order to qualify for an FHA Loan, you need to be a lower-income individual, which means that the Federal Housing Administration will not approve just anyone for this land loan. If you qualify, you will find that this is one of the easiest ways of buying land in the United States.
If you do not want to deal with a financial institution or a government loan program, then you should consider a 3-F Loan. This type of loan involves skipping the pressure of dealing with an official organization. Instead, you will be relying on the financial assistance of your family, friends, and acquaintances, as a 3-F loan involves asking for a loan from within your inner circle.
The best thing about opting for a 3-F Loan is that you are often able to have much fewer obstacles and requirements in order to buy your property - given that you are dealing with trusted people within your private network.
With that being said, you do not want to be careless when seeking out a 3-F Loan. You should approach a 3-F Loan with the same financial responsibility that you would when dealing with a bank. At the end of the day, there is still money on the line and you want to be able to ensure your lender that you will be able to pay them back, which is why you want to create a well-structured financial plan for your 3-F Loan.
Begin by creating a detailed evaluation of the property you are considering and the budget that you need to buy your land. Present this to your potential lender so that they can assist you with your land acquisition. The great thing about 3-F Loans is that you are often able to have much more flexibility when determining the terms and conditions of your loan, which could be things like little to no money down and small or non-existent interest rates. If you are able to get a 3-F Loan with these kinds of conditions, you will find that it is one of the easiest ways of buying land.
About THE AUTHOR
Brittany has been in the land business since 2020 when the world was starting to shut down because of COVID-19. Since then, we’ve sold to dozens of people from ATV weekend warriors to camping enthusiasts to retired truck drivers. Our inventory spans mostly in the western United States. We’ve been trained by experience, land acquisition courses, and hundreds of hours meeting with county assessors and clerks, zoning officials, realtors, and land investors. We’ve answered hundreds of questions from people regarding the buying and use of land.Read More About Brittany Melling