Profile picture for kgnboy

Buying land for future downpayment and mortgage options

I am looking to buy a piece of property for a future retirement home.  We'll have more than 10 yrs before building so I am looking at this as a land purchase primarily.  Given we have good credit (FICO 800+), $60K to put down and $160K in equity what are our options to purchase land in the $300K range. 

Thanks
Dean
  • August 15 2010 - Charleston
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Answers (4)

Profile picture for SoCal Engr
My land purchase experience is dated (2001), but we had to put 25% down. This was explained as lender concern that "land" had less demand than "homes". I'm unsure what the current requirements are for downs, and my experience was in SoCal vice South Carolina.
  • August 15 2010
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I don't know how the mortgage climate to buy land is in Charleston, but I assume it is the same everywhere.  I think the only financing for land with 20% down will be in the form of a purchase money mortgage, that is, seller financing.   If you find a seller who does not need all the cash, and owes litle or nothing...maybe they bought the land years ago and have a low cost basis, you can propose seller financing. 

The advantages to the seller are: a) he won't get all his money in one tax year and won't have to pay all the taxes on that one tax year.
b) He can get a higher interest rate by holding a balloon mortgage for you.  If he puts his money in the bank, the seller will get 1% and have paid at least 20% in capital gains tax.  You can pay 3 or 4% interest only so your payment is low.
c) You will now be paying the property taxes instead of him.

Put this together with the fact that you probably cannot get a mortgage on vacant land and this is the only game in town for both parties. 

I own land for the same purpose, but much less cost so we just paid cash.  Now my wife does not want to live there anymore, so we'll just sell it when the market gets better. 

Please, negotiate the price first, before discussing seller financing.  Always negotiate based on an all cash price.  There are few buyers and you should get a great deal buying land from a motivated seller.

Good Luck.  Let me know how you make out.
  • August 15 2010
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I am not aware of any Charleston area lenders who will finance a lot loan.  Some will finance a lot purchase if you roll it in to a construction loan to  build within 6 months.  You want to explore the possibility of getting a home equity line of credit and use that money along with your
$60K to purchase a lot.  To contact me if you have any additional questions, or if you want to see the vacant land currently on the market go to:  http://www.carolinajoe.com
  • August 15 2010
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There are lenders in the area who will finance land. Check with the local credit unions. I would also recommend that you check with your cpa or financial advisor and get their advise. Borrowing money on your primary home has its advantages, but can be a risky move. 
  • December 03 2010
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