Buy California Land and Finance by Loan
California Land Finance Budget (Example):
Land purchase price $300,000 Land purchase price
Soft cost of construction $40,000 Plans and permits
Direct construction cost $350,000 Construction costs
Closing costs $22,000 Fees, title and escrow.
5% Miscellaneous Reserve $17,500 5% of Construction Costs
Loan interest reserve $35,000 Interest on the amount drawn down
Total construction cost $764,500
Appraised Value $800,000 Estimated Value of Land with Completed Construction
Initial payment $191,125 25% of $764,500
Benefits of California Land Lenders
Loan officers who handle land in California should be able to help you with the following information:
Assessment of estimated annual taxes, insurance and HOA fees.
Approximate interest rate of the loan.
Down payment required.
Interpretation of your personal financial statements, credit scores, and income-to-debt ratios to conclude your eligibility.
Public services lead to the path of finance
One important thing to consider when looking to buy land in California is utilities. When construction developers enter the construction phase to build new homes in Southern California, roads and utilities are built for a large number of homes. When the lender knows that a lot has access to nearby public roads and utilities, they are often more willing to provide financing for the land because there is foreseeable capacity to build on it, increasing the value of California real estate and Reduces risk for the lender. The cost of installing utilities on a lot is not considered part of the construction costs of the building.
Land Loans from a California Lender’s Point of View
California home loans are riskier for lenders than residential loans. The reason for this is that normally most people do not live on the land they buy because it is vacant. As a result, it is industry practice not to consider land a primary residence until something is built on it, so it follows that vacant land is called investment property even if a person intends to build on it in the future. next. In addition, vacant land is called commercial property in California, meaning property used for investment purposes, even if the land is zoned residential and there are plans to build a primary residence. The importance of this categorization for lenders is that their risk is increased in land loans because a person can abandon a land loan more easily than a primary residence loan, since the borrower hypothetically has another place to live.
Land lenders will expect more from a loan than from a residential home loan. A higher down payment is generally expected than a California residential home or condo. More preparatory work is also expected. Lenders may expect the borrower or buyer to bring a variety of items to the lender’s table for a construction loan. Here is a partial list of the possible requirements stipulated by some lenders to obtain a land loan:
Complete and allowable architectural plans of what will be built on the lot.
Detailed schedules for all aspects of construction.
Finalized realistic budget for the building.
Oversight chart, including a list of builder contact information for contractors and the assigned architect.
Proof of bonded and insured builders and contractors.
Here is a list of the required documentation for a borrower to get started with a land loan in California:
Last 2 years of your federal income tax returns.
Pay stubs for the last 2 months, both for you and your spouse, with contact information.
Your property information, if you currently own, including tax returns, HOA statements, any current mortgage statements, and any other debt statements you currently have.
Any additional proof of income streams, including child support, trust fund, investment income, dividends, interest, rental income, social security, or government money.
A complete list of your bank accounts and documentation, including all of your banking, checking, savings, and money market information.
Some negative and positive aspects
One disadvantage is that California courts have fewer regulations to protect the interests of land buyers than they do for buyers of California residential homes, since the purchase of land is considered an investment. On the plus side, land is like having a clean slate of properties. California land buyers find it much easier to plan what they want to build, as long as the building plans meet the city’s zoning requirements and regulations for the location of the land. As a CA land buyer, you also have much more flexibility in getting what you want than, for example, remodeling a residential home.
The best part about getting a loan to buy land in California is that it forces you to think through the land-buying process ahead of time, talk to the right people you’ll need to help you build a new home in Southern California, and make a financial budget with reasonable timeframes so that you can ultimately become a true player in the future development of a community for all to see. Plus, he’ll have a really cool story about his personal experience in the timeless process of building on land in California.