Land loans, also called lot loans, are generally more involved and more difficult to obtain than a mortgage for a home because there is no tangible collateral the lender can fall back on in the event the borrower defaults. Additionally, some banks may not offer land loans due to the market conditions, regulatory restrictions, non-conformance, or bad history with these kinds of loans. Because of these reasons, interest rates on land loans are higher than a traditional mortgage. With fewer options for borrowers looking for land loans, there is less room to negotiate loan terms.
The terms of land loans in Colorado are usually dependent on the intended use of the land, as well. A lot that is ready to be built on (known as a “build-ready lot”) with services and utilities already in place may have less stringent terms than a parcel that is considered an unimproved lot, one that does not yet have services or utilities set up. Raw land, that is with no services, utilities, or plans for future use, is typically the most difficult land to get a loan for as it is considered a speculative investment. Down payments for build-ready lots usually start at 20%, while down payments for raw land can be as high as 50% for land loans in Colorado.
Colorado residents, builders, and businesses can count on Integrity First Financial for land loans. We’ll walk you through the process, which involves additional steps when compared to traditional mortgage loans. Land loans often require a detailed site survey be completed before a bank will fund a loan to buy a lot or vacant land. The survey will identify property lines, dimensions, any easements, and access to the property. Easements and access factor into any given property’s value. Sometimes a lender will accept a recently filed subdivision plat in lieu of a survey. Another factor to consider before seeking land loans in Colorado is whether the property is zoned for development. If the property is not zoned for development, a zoning change will need to be filed with the city.
Land loans are usually short-term loans for plots of land that lenders anticipate borrowers building on in the near future and using a construction loan or permanent loan to pay off the land. Some lenders may have a stipulation that the borrower must build on the property by a certain date.
With the many moving parts of a land loan in Colorado, it’s best to go with a lender that knows how these work and can guide you through the process. For questions about land loans, or questions about our other loan products, please call or email Integrity First Financial at (719) 385-0777 office, (719) 360-3767 mobile, or firstname.lastname@example.org.