You have been looking for some time, and dreaming about getting a lot and building a great house for you and the family. Well, you've found the lot and are now looking for the right financing for it. Getting the right lot loan for your new investment in life can be if you will look around for it, and not move too quickly. Here are some tips to help you get that perfect lot loan.
Know What You Are Looking For
In order to know a good deal when you see one, you are going to have to know a little about lot loans, and their terms. This means doing some old-fashioned homework. Now there is a word that you need to get used to – again. It will prove to be well worth it after you have landed the good deal and sorted out the bad – and saved yourself thousands of dollars.
Have An Investment Ready
Although lenders can be found that will give you a loan for up to about 90% of the price, you will get a better deal and interest rate if you can pay for at least 20% of the loan to value (LTV), but you do not want to pay more than 35%. Beyond these two extremes, you probably will not get a loan.
Establish A Date To Build Your House
Most lenders do not want to talk to you about a lot loan unless you have a date to build your house within 5 years of buying the land. By having a concrete date set, you will be more likely to have your lot loan approved. By talking to them about being able to convert the loan to a construction loan and then to a first mortgage, you will find many that would be glad to talk to you. Going this route can save you some money, too.
Determine The Best Kind of Loan
Knowing the difference between a fixed rate mortgage and an adjustable rate mortgage could mean a difference in savings of thousands of dollars. Although both have a fixed rate of interest for a while, one will definitely do better than the other – depending on which way the economy is going.
Get Online Estimates
Most mortgage companies, and other lenders or brokers, have websites and give you access to getting your free online mortgage estimates. By typing in some basic information, some websites will give you results from many different mortgage lenders. Remember, though, that online estimates are only that – estimates. In order to correctly calculate what a mortgage would be, a company must review your credit rating and physically do an appraisal of the property.
Break Down The Estimates
Try to break down the estimates you received into the base loan and the fees. Then compare each of these among the same type of loan, whether a fixed rate or an adjustable mortgage.
After you believe that you have found one or two companies that look good to you, you can check them out on the Internet and make sure that they are good companies. Then, talk to them and see if you can negotiate an even better deal than what was originally offered. A little hint – the fees are what you want to work on.
Finally, watch out for ERC's, or Early Redemption Charges. These things will prevent real savings if you should decide to pay off the mortgage early. In other words there is a fee for it. Throw it into the negotiation process too, and if they will not remove it – others are available.