Grand County Real Estate: What do I need to know before buying vacant land? |

Grand County Real Estate: What do I need to know before buying vacant land?

Q. I want to buy vacant land and build on it in a few years, but I don’t really know what steps to take.

A. I will answer this in a two part series.

This week, I will focus on the money part; next week I will talk about the land purchase.

First, research your financing options. Are you able to pay cash for the land? Or do you need to obtain a loan? Land and residential loans are different. When purchasing land a buyer must have a minimum down payment; typically a minimum of 10 percent of the purchase price of the property. The buyer will also need to have funds available for lender and title company closing costs. Example: If the land is priced at $50,000, a buyer will want to have no less than $8,000 available to spend on the down payment, closing costs, surveys and inspections. Be sure to have your lender provide a Good Faith Estimate so you will know up front what costs are associated with the purchase.

Land loans are amortized over 15 to 20 years and often have a three or five-year balloon. This means the monthly payment is calculated according to a 15 to 20 year payoff, but the full amount due for the loan is payable in full at the end of the loan term.

Often, within the loan payoff term, a landowner will begin constructing a home on the property. The first draw on your construction loan pays off the land loan. Sometimes, you can roll the land and construction loan together, but there is a stringent timeframe in which you must begin construction on the home to qualify for this type of program.

When we purchased our land, in order to do a combined land/construction loan, we had to begin building within six months. We opted for a land loan with 10 percent down, 20-year amortization/three-year balloon. We started construction 18 months after purchasing our land and the construction loan paid off the land loan, satisfying the requirement for full payoff within three years of purchase.

Be sure to get pre-qualified and have necessary funds available before heading out to look around.

Completing this step will inform you of what purchase price/monthly payment fits your budget, the amount of money necessary to complete the purchase and the timeframe you will have to decide what your long term goals are for the land.

Brenda Kellen can be reached at (970) 485-1115 or

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