California Land Financing Budget (Example):
Land purchase price $300,000 Land purchase price
Construction soft cost $40,000 Plans and permits
Direct Construction Cost $350,000 Construction Costs
Closing costs $22,000 Fees, title and escrow.
5% Miscellaneous Reserve $17,500 5% of Construction Costs
Loan interest reserve $ 35,000 Interest on the amount disposed
Total Construction Cost $764,500
Appraised Value $800,000 Estimated Value of Land with Construction Completed
Down Payment $191,125 25% of $764,500
Benefits of California Land Lenders
Loan officers dealing with land in California should be able to help you with the following information:
Assessment of estimated annual taxes, insurance and HOA fees.
Approximate interest rate of the loan.
Initial payment required.
Interpretation of your personal financial statements, credit scores, and income-to-debt ratios to conclude your eligibility.
Public services lead to the path of finance
An important thing to consider when looking to buy land in California is utilities. When construction developers go into the construction phase to build new homes in Southern California, roads and utilities are built for a large number of homes. When the lender knows that a lot has access to nearby public roads and utilities, they are often more willing to provide financing for the land because there is predictable capacity to build on it, increasing the value of California real estate and reduces the risk for the lender. The cost of installing utilities on a lot is not considered part of the construction costs of the building.
Land Loans from a California Lender’s Point of View
California real estate loans are riskier for lenders than residential loans. The reason for this is that normally most people do not live on the land they buy because it is vacant. As a result, it is industry practice not to treat land as a primary residence until something is built on, so it follows that vacant land is called investment property even if a person intends to build on it in the future. next. Also, vacant land is called commercial property in California, meaning property used for investment purposes, even if the land is zoned residential and there are plans to build a primary residence. The importance of this categorization for lenders is that their risk is increased in land loans because a person can withdraw from a land loan more easily than for a primary residence, since the borrower hypothetically has another place to live.
Land lenders will expect more from a loan than from a residential home loan. A higher down payment is generally expected than on a California residential home or condominium. More preparatory work is also expected. Lenders may expect the borrower or buyer to bring a variety of items to the lender’s table for a construction loan. Here is a partial list of the possible requirements stipulated by some lenders to obtain a land loan:
Complete and permissible architectural plans of what will be built on the land.
Detailed schedules for all aspects of construction.
Finalized realistic budget for the building.
Supervision chart, including a list of builder contact information for contractors and assigned architect.
Proof of bonded and insured builders and contractors.
Here is a list of the documentation required of a borrower to get started with a land loan in California:
Last 2 years of your federal income tax returns.
Pay stubs for the last 2 months, both for you and your spouse, with contact information.
Your property information, if you currently have it, including tax returns, HOA statements, any current mortgage statements, and any other debt statements you currently have.
Any additional proof of income streams, including child support, trust fund, investment income, dividends, interest, rental income, social security, or government money.
A complete list of your bank accounts and documentation, including all of your banking, checking, savings, and money market information.
Some positive and negative aspects
One drawback is that California courts have fewer regulations to protect the interests of land buyers than they do for buyers of California residential homes, since the purchase of land is considered an investment. On the plus side, land is like having a clean slate of properties. California land buyers find it much easier to plan what they want to build on, as long as the building plans comply with city zoning requirements and regulations for the land location. As a CA land buyer, you also have much more flexibility in getting what you want than, say, remodeling a residential home.
The best part about getting a loan to buy land in California is that it forces you to think about the land-buying process ahead of time, talk to the right people you’ll need to help you build a new home in Southern California, and make a financial budget with reasonable deadlines so that you can ultimately become a true player in the future development of a community for all to see. Also, he will have a really great story about his personal experience in the timeless process of building on California land.