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Buying land in Rio Rancho can be a relatively easy process. Once you have found your dream lot, you will need to determine how you will finance the purchase. The type of land you plan to buy will be a factor. While it ultimately depends on the owner of the property, you may be able to utilize one of the five financing options below.
The easiest, common and most cost effective financing option, is cash. Now, not to burst your bubble, but paying with cash does not necessarily mean that you will be able to low-ball.
It honestly does not matter much to an owner if you are paying $50,000 cash or $50,000 via land loan, they are still grossing $50,000 at closing either way.
The cash option is primarily a savings for you because you can avoid loan fees and interest. Another perk is that you can close sooner than paying with a land loan.
The easiest, common and most cost effective financing option, is cash. Now, not to burst your bubble, but paying with cash does not necessarily mean that you will be able to low-ball.
It honestly does not matter much to an owner if you are paying $50,000 cash or $50,000 via land loan, they are still grossing $50,000 at closing either way.
The cash option is primarily a savings for you because you can avoid loan fees and interest. Another perk is that you can close sooner than paying with a land loan.
Just as it sounds, a land loan is used solely to fund the purchase of a vacant lot. A handful of local banks and credit unions offer these type of loans. Some are:
The downside to land loans are, they tend to have a wide range of fees such as:
Transactions financed with a land loan can take 4+ weeks to close. The overall process is similar to applying for a mortgage.
If you are an existing home owner, you may be able to use the equity in your home to purchase vacant land. It’s a hybrid of cash and loan. You will take out a line of credit against your home which enables you to purchase a lot with cash. This option could have fewer fees than a traditional land loan.
In some cases, owner-financing may be an available option. Also known as Seller-Financing or an REC (Real Estate Contract), this financing alternative would request that the owner act as the bank and carry the note. While you will likely still pay a high interest rate, you can avoid many of the lender fees often associated with a land loan. Owner-Financing generally will have a down payment (e.g. 20%), interest rate (e.g. 9%) and term (e.g. 24 months).
This is not a common option, but you could trade something for a vacant lot. For example, you could trade a home, vehicle, stock, equity on a business or other land you own. Understandably, the value of what you are wanting to trade could be expected to be equal or greater in value.
Whether you are paying with cash or owner-financing, there at still title company closing costs to factor in. From title insurance policy to recording fees, be sure to leave room in your budget for these negotiable costs.
Call, text or e-mail a real estate broker with over 18 years of Rio Rancho land experience. We are available to answer any questions that you have.
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