Why Financial Institutions Differentiate Between Lot And Land Loans

Buying a parcel of land is a major life decision someone can make. Unless you have the full amount of the property right away, land loan financing might be a good idea. Having information on the types of land loans available is crucial. What type of loans best suits your situation? From an informed point of view, the answer might seem obvious. The loan options offered come with unique characteristics and the lending options that determine your eligibility depend on your unique set of circumstances. This includes your financial situation, the property to be purchased, your level of preparation and timing. If you are looking for more information on where and how to get these loans click here now. Here is some information about the particulars of lot and land loans.

First, make the distinction between vacant land loans and those for already constructed homes. Most financial lending institutions differentiate between the two. So what makes the two different from a client’s perspective? What are their terms, underwriting requirements and general characteristics?

Why financial institutions differentiate between lot and land loans

Difference between lot and land loans

fdgdfgfdgdfgfdgfdgThe terms and requirements given to borrowers differ if the property has a finished lot or is an undeveloped vacant parcel. Different concessions are given for a lot with utilities or a road than for vacant land. A finished lot is a less risky investment for the lender as it’s a step closer to the development of the home.

Acreage differentiation

There are lenders who base their lending decisions on using acreage thresholds. They involve classifying your property either as land or lot. Once categorized, this has a direct bearing on what loan terms you will be subjected. Nevertheless, different lenders have their own set of requirements.
However, it’s almost with certainty that a largely undeveloped land will be categorized as vacant land. It’s harder to secure financing for land that does not have any feasible form of development.

Terms and conditions of the land & lot loans

The terms issued for the loans depend on the issuing institution. The terms of your loans depend on the borrower, financial institution the prevailing market lending conditions. Main areas worth noting are loan length, interest rates, collateral, availability, amortization, underwriting,
etc. For a detailed explanation on each of these terms, click here now.

Can you bypass the lot loan?

fhgfhgfhgfhfghfgThe lot or land loan is suited for those who have found a parcel of land but are not financially prepared to construct a house. In some instances, it’s advisable for the buyer to opt for a construction loan instead particularly when you have completed the new home designs and plans. It will depend on how good your argument is. First get a contractual agreement for your land with a lot purchasing agreement with a stipulated time-frame wherein you will complete your plans. Once your contractor is ready, get your construction financing approved. This presents the perfect opportunity to arrive at a close on the lot purchase, same time as your construction loan.


Remember that different financial institutions offer own terms and conditions. So, take the time to compare and contrast accordingly. By reading additional articles on the subject online, you will become more knowledgeable on the subject matter.…

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