Farm and property loans are available from several types of lenders:
- Thrift institutions
- Mortgage companies
- Commercial banks
- Credit unions
Keep in mind that various lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can obtain a loan through a mortgage broker, whose contacts to multiple lenders can mean a bigger selection of loan products and terms from which you can choose.
Here are a Few Factors To Consider When Looking For Land:
- Landscape & quality of land
- Wildlife
- Location
- Property taxes
Generally, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.
Also Consider LOAN TO VALUE (LTV) H
The loan to value ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: With a 95% LTV loan on a home or property priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would pay $2,500 as a down payment.
The LTV ratio reflects the amount of equity borrowers have in their properties. The higher the LTV the less cash buyers are required to pay out of their own pockets. So, to protect lenders against potential loss in case of default, a higher LTV loan (80% or more) usually require an mortgage insurance policy.
Fixed Rate Mortgages Payments remain the same for the life of the loan.
Types:
- 15-year
- 30-year
Advantages:
- Predictable
- Cost remains unaffected by interest rate changes and inflation.
Adjustable Rate Mortgages (ARMs) Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits.
Types:
- Balloon Mortgage – Offers very low rates for an Initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is due or refinanced (though not automatically).
- Two-Step Mortgage – Interest rate adjusts only once and remains the same for the life of the loan ARMS linked to a specific index or margin.
Advantages:
- Generally offer lower initial interest rates
- Monthly payments can be lower
- May allow borrower to qualify for a larger loan amount
An ARM may make sense if you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren’t concerned about potential increases in interest rates.
We would love to visit with you further about your options with local banks and credit institutions that will finance your new land purchase.