Traditional, institutional lenders such as banks will not lend on raw land in most cases. Land loans contain more risk since the property is unimproved and does not produce rental income. Due to this increased risk, land loan rates are higher and have a lower loan to value (LTV) ratio in order to protect the land loan lender.
If the land loan is for a purchase, borrowers usually begin looking for land financing once they have identified a subject property and have done research to ensure their plan for the property is feasible. Factors to be considered may include verifying the current zoning of the property, determining what if any improvements have already been completed on the land (utilities, sewer, roads, etc.) and getting the property surveyed to discover property lines, easements and access to the land.
Lenders are more likely to fund loans for land and with more favorable terms when the borrower is able to present a comprehensive plan to improve the subject property and also present a realistic exit strategy to pay off the land loan.
*North Coast Financial is only able to consider land loans within California. The borrower must have a down payment of at least 50%.