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Various Options for Financing Land

For those who want to build their homes in rural areas, the U.S. Department of Agriculture has financing options. Section 523 loans from USDA are available to those who want to buy land for development. Section 524 loans can be used to finance construction by contractors.

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Various Options for Financing Land

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  1. Various Options for Financing Land 1. USDA Loans For those who want to build their homes in rural areas, the U.S. Department of Agriculture has financing options. Section 523 loans from USDA are available to those who want to buy land for development. Section 524 loans can be used to finance construction by contractors. These loans do not require a down-payment and have low-interest rates. They must be repaid within two years. Section 523 loans and Section 524 loans were created to assist low-income families in becoming homeowners. They are subject to zoning restrictions and land-use regulations.

  2. 2. FHA Loans FHA loans are a loan that allows you to purchase land and build your home on it in a very short time. FHA loans are loans that have been insured by the Federal Housing Administration in order to protect lenders against risk. FHA loans can be used for land purchases only. However, they are sometimes combined with construction loans. FHA loans do not require a large down payment, unlike conventional loans. To compensate, interest rates might be higher. Even if you have declared bankruptcy or suffered foreclosures you may still be eligible for an FHA loan.

  3. 3. Home Equity Loans Home equity loans are available to buyers who own a property but have no or little debt. Home equity loans can be used to turn your equity into collateral to secure a loan to finance your purchase. There are many types of Home Equity Loans. Learn more about your options by contacting your financial institution. 4. Cash-Out Refinancing Refinance your home to get equity. This is basically paying off your existing mortgage to obtain a new mortgage with a lower rate of interest or simpler monthly payments. Your financial institution will issue you a check based upon the equity in your property after the remortgaging process has been completed. This cash can then be used to buy land.

  4. 5. SBA Loans The 504 loan program, which is offered by the Small Business Administration (SBA), could be of benefit to business owners. The SBA would finance 10%, while the lender would finance 50%. The terms of these loans will vary depending on which lender you choose to finance 50%. 6. Seller Financing Sometimes, you may be able to get financing directly from the landowner. Seller financing requires substantial down payments and generally lower interest rates. Seller financing will cost you more than financing through the bank. This type of loan is not recommended if you aren't eligible for traditional financing. To avoid unnecessary stress, make sure you carefully review the terms and understand the fine print before you sign anything.

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