Land loan with 10% down?

Question

My brother is investigating a potential investment property that could have significant upside if certain easements are obtained. He intends to keep the land for personal use initially, however. The purchase price would be around 200K. I am fairly unfamiliar with land loans, and my brother is only capable of a 10-15% down payment at this time. Do any lenders on this forum have advice on loan types or options? Thanks in advance!

Erik Estrada · Answer

Most land loans require at least 50% down and are short term. What is the goal in getting the land? Ground up construction?

Michael Kinsella · Answer

@Brandon Vanderford

Some good insights on this thread thus far.

1. Land is not a favored asset class amongst lenders. Typically you see ~50% LTV on land with market LTC possibly reaching a bit higher, but not much.

2. 200K purchase means the loan might pencil out around 100K - this is a very low loan amount for most land purchases.

Probably a local pre-existing banking relationship or an individual private lender are your best bets.

Adam Bartling · Answer

@Brandon Vanderford this is possible if you have construction plans ready to build for a Owner Occupied home. Non owner occupied the land can still be put into the loan but be prepared to come in at 25-30% DP.

Brandon Vanderford · Answer

That is helpful information, David. Thank you.

David A Lisowski · Answer

@Brandon Vanderford

Land has no value in the mortgage world. Lenders won't have much collateral on empty lots.

Most "land" loans are essentially construction loans that turn into mortgages (construction-to-permanent loans) once the dwelling/structure is completed.

A "buy and hold" on land is essential prospecting. It's real estate prospecting. So that will need to be financed differently (i.e. cash, hard money, etc).

It will also depend in if it is raw land, or undeveloped land (assuming it's not already developed).

Brandon Vanderford · Answer

Thanks, Dave. That is increasingly sounding like the best option.

Dave Skow · Answer

@Brandon Vanderford-  land loans  are not  that  common  ....the lenders  that  do  exist will require large  down payments / ( 30%  or more ) /  have  high rates   and fees /   likely  be  short term  and  also  require  improvements  be on site  ( sewer / septic / water / elec)  ...your best bet  will be   a  smaller to mid size  credit union or bank located close to the  subject property

Grace Maxwell · Answer

We are one of the lower down payment options in that area at 20% down for 740+ credit - I have not heard of anyone with 10-15% down. Can he borrow against another asset?

Nathan Fuller · Answer

Is it the same if I planned on putting a structure on the land rather than builing?

mobile home, container home, tiny home....

Land loan with 10% down?

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