Buy Land with Bad Credit: A step-by-step guide
Do you dream of owning your own land in the country? Perhaps you want to build a house, have space for recreation or create a small farm or ranch? Whether or not you plan to make a profit with your land or not, it is important to shop around for the best deal when finding a bad credit land loan. Though acquiring a bad credit land loan can be difficult, it is not impossible, so don’t let the difficulty deter you from trying. Read on for more information on how to buy land with bad credit!
While it may seem like a nearly impossible idea to buy land with bad credit, it is possible. There are a few things to consider when looking for a bad credit land loan. First of all, the interest rate will typically be higher than if you have a good credit score. Again, don’t let that discourage you from looking. There are always new lenders starting up and competing for your business. Typically lenders require a 40%-60% down payment on the land for bad credit but it is possible to find ones that only require 20%-30%. Lenders also typically want to see a concrete plan in writing for how the land will be used to pay back the loan. If there is no viable plan for the land, creditors are very hesitant to approve a bad credit land loan. A third thing to consider is whether you have collateral for the loan. Collateral functions as a way for the lender to recoup their loss if you default on the land loan. Having collateral of some kind can also help to diminish the required down payment amount. Collateral translates to higher chances of being able to buy land with bad credit.
Steps to Finding a Land Loan
First of all, you must determine how you plan to use the land. Do you intend to build a primary residence or vacation home? Are you planning to use the land for agricultural purposes such as a ranch, farm, or hobby farm? Do you plan to use it purely for recreational purposes such as hunting? These are major factors in determining whether a bank or other lender will be likely to loan money as they typically want to see a plan for how you intend to pay the money back.
Second, decide what kind of down payment you are able to put down. If the land you are planning to purchase is unimproved and has not been zoned, down payments are typically between 20-40% of the price. However, if the land has been zoned for your intended use and has some improvements (such as electricity or a water source) the down payment is generally lower.
Third, find a lender with good interest rates and a payback term that will work for you. Often these are 5-10 year periods but can be as much as 38 years depending on certain factors. There are many sources for finding loans for empty land, including credit unions, farm and agriculture loan companies, and owner financing. These loans are called different names, including “land lot loan”, “land purchase loan”, “raw land loan”, “residential lot loan”, “land mortgage loan” and “vacant land loan”, among others. These can refer to land that is completely unimproved as well land that has been zoned and improved upon with electricity or another utility.
Fourth, determine what kind of special programs you may qualify for, such as Veteran land loan programs, FHA loans, USDA Rural Development programs, and others. These types of programs are designed to help Veterans, low income individuals and families, beginning farmers, and others. Often, they offer much better interest rates, lower down payments, and/or a longer repayment period if needed. Nearly all of the central Texas land we have available is eligible for the Texas Veteran Land Board Loan program, as well as the USDA rural development program, among others.
Though it may seem difficult to get a land loan with bad credit, there are many lenders and many programs that can help make it possible for you to buy land with bad credit for your dream home, ranch or hobby farm. Contact us for more information about how Central Texas land can be yours! Most of the land we offer has been zoned and has been improved in a way that makes it easier to find a lender than if it was a “raw land lot”. We do this because we want to make it as easy as possible for you to buy your own piece of Texas heaven.