Different Types of Land Loans you Should Know
Land loans are used to finance buying tracts of land. They are usually a small slice of the market but tend to be riskier than mortgages. If your lender has a foreclose on a land loan, you are not guaranteed to get back your money.The process of acquiring a land loan varies based on where the land is located and how you intend to use it. Below are some of the best options for land loans.
Lot Land Loan
Lot land refers to land with some structures in place, such as water and electricity lines. Such land is normally building space for residential construction in a developed area. Lenders can more easily offer loans for lot property than raw land, so upfront costs will generally be low. However, you still have to make a down payment of between 10 and 20 percent, and the terms can go up to 20 years.
Raw Land
Unlike a lot land, raw lands have no improvements, including sewers, roads, or electricity. If you are buying completely undeveloped land, then you should apply for a raw land loan. Getting financing for unimproved land may be difficult since the longer it takes to develop the land, the greater the risk to your lender. With a solid plan for developing the land, you can increase the chances of getting a raw land loan. A substantial down payment and good credit will also increase your chance of acquiring the loan. 
Construction Loans
These loans allow you to buy land and cover the cost of construction as well. It would be best if you had a 700 or higher credit score to qualify for a construction loan. Consistent income, an appraised value for home plans, and a low debt-to-income ratio are prerequisites for getting this loan. You should also expect to put between 10 and 20 percent as a down payment for the load. Your lender will need to see a qualified builder doing the construction alongside projected costs and estimated timelines.
Ensure your plans are thorough if you want to expedite the process. Look for a builder that the lender is familiar with as the lender will be involved throughout the process.
