Land loan - negotiating - multiple preapproval letters?

Question

Hello, I’m looking at buying improved land in a market near mine (Spokane, WA). The goal is to buy land while cheap(er) and sit on it for a year or two while I raise capital to build and hold a fourplex.

I don’t have an established relationship with any lender there and am shopping around. I’ve found 3 local credit unions and two other banks my real estate agent recommended.

What’s the best way to negotiate a favorable rate? Should I find a broker? Should I get Preapproval for 4 or 5 and then negotiate later? Or does negotiation power diminish after you get the Preapproval?

I’ve already got my hard credit pulled on one preapproval and figured I should get my others in now to minimally affect my credit score.

Thanks for the tips!

David

(Architect, owner builder, first-time investor)

David Judge · Answer

Hello @Jay Hinrichs, thanks for your input. I used BECU for a land-only purchase back at the end of 2020. We put 60% down and had a $50,000 land loan. In 2023, I paid that loan in full before going through Heritage Bank out of Bellingham for an owner builder one-time close (const. to perm) loan. The shut down their mortgage departments at the end of 2023 though. For this new venture, I found BECU will still do land loans (30% minimum down for improved land, 50% for unimproved) with a minimum loan amount of $50,000. Here are the other lenders I found in Spokane that offer land loans: Idaho Central Credit Union, Numerica Credit Union, and Global Credit Union. I can save enough capital by the end of 2024 to not need a land loan and buy the land outright, which is what I'll most likely do.

Jay Hinrichs · Answer

first off see if any of them will do land loans.. Most will not under the scenario you described most of us that do this infill need to pay cash before the bank will give us vertical they want the land brought in as equity ..

But if you do find an actual state chartered lender that will do a land loan please post it here I would be super interested to know who they are.

I use Heritage out of Olympia.  They are only going to loan to experienced folks though and not on the land land must be free and clear.. there was a bank in Washington that used to do these for owner occupied lot vertical combo then roll to perm.. Cant recall the name but I think the GFC might have taken that product away.

good luck and as I said please share if you actually find a land only lender that is not HML or PML>