View Full Version : Raw land mortgage?  What are my options?

02-19-2008, 06:04 PM
My wife and I are currently renting. Our ultimate goal is for us to one day build and own a homestead away from the city. (We live in Seattle now and we are looking to go to Clallum county, for those who are familiar with the area).

In a few months, we will be looking to purchase something. One option that we have considered is to get a loan for a tract of land and continue to rent as we prepare and improve the land for our future.

This seemed like a great idea until I researched this option further and found out that mortgage lenders seem to be less willing to lend money for raw land. Is this true? What are our options and chances of procuring a loan for such an endeavor? Any help and/or experiences would be helpful.

(Our second option is to buy a condo or house and re-visit this idea in a few more years once we have gained a bit of equity on that property).


02-19-2008, 06:54 PM
I think it depends some on where you live....I'd heard that you can't finance vacant land, either. But when I went to my banker and asked about purchasing my property, he said they do issue those kinds of loans.

As it worked out in the end, I used the equity in my house to purchase the land; it just made better sense as far as interest and closing costs, but if I hadn't had the equity, they would have made a loan on the land.

(I live in a rural area of Michigan, maybe the banks are used to a lot of vacant land?)

I guess just keep looking and asking, and maybe you'll find a good lending source. Another way you might want to try is going with a land contract; then pay it out and get a mortgage when you actually move to the land.

02-19-2008, 11:54 PM
Thanks for the advice and the website everyone. I now have a starting point! ;D

02-20-2008, 01:21 AM
We've found that when it comes to vacant land your best bet is probably a small local bank for things like that. I don't mean to insult you by saying this, but unless you're real estate savy I would steer clear of a land contract. We do real estate investments as a business and believe me when I say there are ALOT of ways to get your eyes screwed out by someone with out any ethics whenit comes to a land contract. I don't know what the law says in WA but here in Ohio until you have paid in 20% you have NO equity in the property. Thus making you a tenant not an equitable owner.

just my .02

Good luck


02-20-2008, 01:26 PM
You may also see if anyone is doing owner finacing. It wasn't an option when we stared trying to buy our place but while we were in the middle of negotiations it was offered and we took it. We are paying 2.5% less than the bank wanted for intrest. Thats the other thing here in VA land mor. is higher than a house mor. by several % ie house 6% land 9% so you should keep that in mind.


02-20-2008, 01:35 PM
Is there a difference between a land contract and owner financing or are we talking about the same bag of apples?

02-20-2008, 09:29 PM
Is there a difference between a land contract and owner financing or are we talking about the same bag of apples?

Sorry I am not familer with a land contract. It could well be what we have by a differnt name. We also put over one third down by refinancing our current home.

Sorry couldn't be more help.

02-20-2008, 10:54 PM
Good credit is the answer. The reason they don't like to lend on raw land is people will go in and cut the lumber and run. Plus with a house on it , it has a greater percentage of the people that are buying will make the payments. If your credit score is in the 700 plus you should have no problems. My personal oppinion on renting is your feeding a dead horse.

04-10-2008, 06:38 PM
i bought land zoned privite forest. even thow it assest higher than the purchase price. with excelent credit. i had to go to a small bank get a construction loan at high interest short term, and had to have 25% down. i am building this yr and plan on getting a home equity line of credit (Lower interest and still can write off the interest on your taxs) with a line of credit you only pay interest on what you use