When you are planning to move into a new home, there are a lot of hurdles to jump through in the home buying process. When you are planning on buying a piece of property to build on, this is even more so the case. Building your dream home is one of the most exciting things you can do and one of the best ways to get exactly what you want in a house, so if this is your plan, we would love to help make that happen! Because there are a few differences between buying a home and building one, we have compiled a few tips to help you get started in the process!
Use a Realtor
While we do also recommend you use a professional realtor when buying a home, the need is that much greater when buying a lot to build on. There are so many more things to be aware of and to consider in this process, and having someone with you that has experience in that process will benefit you in many ways. When choosing a realtor, you will want to go with someone who has extensive experience in what you are looking for, so be sure to ask them questions about their background and maybe even get references for you to get in touch with. This is one of the best ways you can ensure that your purchasing experience will be as seamless and pain free as possible.
Know the Zones
There are a lot of different types of pieces of properties out there that you could purchase, but every lot of land is not created equal! Your long term plan for the lot should be at the forefront of your mind when you are in the shopping period. For instance, some lots are already zoned and ready for you to build on. This is especially true when you are buying a lot in an established neighborhood or housing development. Because these lots were initially intended to be built on when the neighborhood was established, it is a more simple process to purchase for construction. However, if you are purchasing a piece of property that is not zoned for construction or for residential purposes, you will have a lot of hurdles to jump through if you can get through them at all. This process will be way more drawn out and require a lot more work with the city to get the right permits and to get everything zoned properly. Not only can this set you back, but this can also affect whether or not you can get a loan. Since a lender’s purpose is to get a return on their investment, they like the reassurance that you can achieve what they are loaning you money for without too many setbacks.
Have Your Plans Ready
Buying a home is not a notoriously cheap venture, and luckily there are multiple types of loans available for different types of financial situations. While the average person can get a mortgage loan for as little as 3.5% down, this is not generally the case with a land or lot loan. One thing to consider is that you do have to have a lot more upfront when you are planning on building a home, and not just in terms of a down payment. Typically, before a lender will approve your loan to buy a piece of property to build on, you need to have completed plans drawn up as well as a reputable contractor to do the work. You have to consider the risk for a lender in this process, which is why they require more money upfront as well the plans. When a lender gives money for a mortgage, the actual house works as collateral for the bank to protect their interests in case the borrower defaults for whatever reason. When it comes to loaning money for a structure that doesn’t exist yet, the lender needs a little more of a guarantee to go forward with the process – often in the form of a much higher down payment as well as a plan you have already personally invested into.