For those that have done it, since there is no house on it, what type of loan would I need to apply for? I've heard of people buying a lot using a construction loan but those are usually done if you are also building a house on the lot. I'm interested in purchasing this lot and although I likely would build a house on it, that would not be for a few years.
I'm going to contact my credit union and ask but thought I'd ask for any personal experiences here for any advice first.
The lot has a two stall garage on it which is the added attraction in addition to the location of the lot itself.
I went through this awhile back with my "shop". In my case, I had been renting the property for about 1-1/2 years.
The owner and I did a land-contract deal, which in many cases can be bad for both sides. But there are several personal connections between the seller and myself, to where it would be stupid for either of us to try to screw the other person.
Banks have been very leery of lending on vacant land. It's the first property get dumped on them when times get tough.
I've looked into it a time or two, but basically they wanted some other collateral or a pristine credit report and would only go 7 years on the terms. That was several years ago so things have probably changed since then.
The last time I bought vacant land (bigger than a lot) it was suggested by my bank to take a mortgage on my house to get the money. The interest rate on vacant land was almost triple what a mortgage was. This was about four years ago.
Your best option is to buy it with cash if you can. You'll need that as equity when you build a house. If you can't buy it with cash, then it may not be a wise purchase for you.
A loan is going to be tough to find, anyway, as others have pointed out. Maybe you have some relatives that can lend you the money?
I was always taught the lot must be paid in cash.
High interest to buy a lot to sit on, if you find a bank to take it on. Ag Credit union maybe?
The last I checked there were no cost effective ways to get a loan specifically to buy an empty lot. Cash or cash-like transactions are the norm for this kind of purchase. The only time I did it, I used credit card balance transfer offers but that was back when they had 0 fees, so I ended up paying very, very little in interest and paid the lot off in a year or two. Nowadays with even the "low cost" balance transfer offers carrying a 4% or 5% fee, it's not quite as cheap to do it that way.
How much money are you looking at for this lot? Does the garage have plumbing and heat? Any chance it could count as a house?
Then again a typical home loan is going to carry a $1200 or so closing cost plus appraisal and title fees and so forth. You'll end up $2000 in the hole just on fees.
You are buying the two car garage, which happens to be on the lot.
Might be the way to go.
Unless the garage is falling down.
Toyman hit it on the head, people dump vacant land quick when times get tough. You'd be amazed how many foreclosures down here are vacant land, developer lots that no one wants to build on currently.
If it's reasonably priced and really what you want to do, I'd look into owner financing. Pay as much as you can down, finance the balance over the shortest period possible. Warning: do your due diligence and be real sure you don't buy something that for some reason will screw you up when it comes time to build a house (zoning, septic perk problems, etc).
HELOC? Borrow from 401k?
As mentioned by others, cash is your best option.
how large is the lot? could it host rallycross? if so, kickstarter
iceracer wrote:
You are buying the two car garage, which happens to be on the lot.
Might be the way to go.
Unless the garage is falling down.
That's how I'm looking at it. The lot is in an area I want to be in. It's a standard city lot and only one of the abutting properties has a house on it. It's a standard city lot but does have some nice trees in the right spots plus the garage which as far as I can tell is insulated and does/did have a heat source.
I know it doesn't mean squat but Im not gonna default on any loan. The lot is 39k but has 10k in unpaid assessments from recent new street and city sewer and water.
Talk to a realtor for information as to values and possible financing.
In reply to drainoil:
"The lot is 39k but has 10k in unpaid assessments from recent new street and city sewer and water."
Wait and get it at Auction for under 10K. Or offer the seller to pay the assessments and closing cost which would allow them to walk away from the property with no debt to the government. If they default they're have to pay taxes on the amount of debt that is forgiven upon doing so. The seller has zero leverage in this situation, allowing them to walk away from the property is the best offer they'll get.
