If you are contemplating a land purchase, you must think carefully about your finances. Unless you had saved enough money to pay for the piece of land you intend to purchase, you would need a loan. Before you start looking for land for sale in Plumpton, it’s important to know essential facts about land financing. Keep in mind that acquiring land financing creates a unique set of hurdles for the buyer. Here is what you should know.
Your income is one of the primary aspects your lender will evaluate. In order to determine your eligibility for a mortgage or any other property loan, the lender will look at your gross monthly income. If you have a stable job and you make $60,000 a year, your income is likely to be lower than if you are making $90,000 or more a year. Your mortgage lender needs to only allow you accommodative income that is sufficient to assure them that you will be able to indeed pay your mortgage payments.
Those numbers have to be in your budget before the lender makes an income evaluation and determines if you are eligible for a mortgage. The upside for you is that the higher your income, the less down payment you may have to spend on your property payment. Conversely, if your income is low, then you will need to save more to pay off your mortgage quickly. Otherwise, you may end up struggling to pay your mortgage and, in the worst-case scenario, cause lasting financial challenges.
Your down payment
How much money do you have for a down payment? This amount is important because it means you are not going to need as large of a down payment to get a mortgage as, for example, a 20 percent down payment would require. In fact, your down payment can be a recovered or earned down payment as well. You or your lender can use a financial institution such as a bank as a source of funding.
The bank can lend you money for a down payment and allow you to acquire a larger mortgage. The cost of the mortgage is still reduced because of the “floor” or minimum down payment the bank requires. According to real estate investment experts, it is important to save enough cash for the down payment to reduce the number of monthly installments.
Your credit report
Your prospective lender will also review your credit report before they make a determination if you are eligible for a mortgage. Your credit report will show your credit score as well. The credit score is an expression of your creditworthiness. The higher your credit score, the greater the chance of you qualifying for a mortgage. As with any mortgage or property loan, you must make timely bill payments and be in good standing with your financial commitments.
If you are late on any of your bill payments, or in case of bankruptcy, your credit score will also be affected negatively. Remember to take care of all the little details: pay your bills on time, pay off your credit card bills before they are due (especially the delinquent ones), and stop gathering unnecessary bills.
Since you most likely will not have the cash to pay all these bills immediately, simply ask your creditors to give you a letter explaining your situation, and request an explanation in writing. Keep this letter in your file because you may need it at some point if you experience some difficulty making all your payments at some time in the future. In this way, you can build your credit up again.
Your prospective lender will order what is called a property appraisal. This is essentially an estimate of the value of the property you are purchasing. The price indicated in the appraisal report will almost be similar to the price seller, and his real estate agent will offer to the buyer. However, this is just an appraisal; it can change. Keep in mind that there are other expenses associated with buying a piece of land, and your lender may require that an independent inspector verifies the value of the land and determines the value of the property.
In addition to the finance aspect of acquiring a piece of land or property, it’s essential to think about the local laws regarding boundaries, access, and zoning. For this reason, it is essential to get the right boundaries marked by licensed surveyors and have everything documented ready to be presented to your prospective lender. If the property is intended to be used for residential purposes, make sure it is connected to utilities. Having sewer, water, electricity, and other hookups ready will save you a lot of time, hassle, and money.