You have been looking for a while and dreaming of getting a lot and building a great house for you and your family. Now that you've found the lot, you're looking for the best way to pay for it. You can find the right lot loan for your new investment in life if you take your time and look around. Here are some tips that will help you get a loan for that perfect lot.
Know what you want before you look.
To know when you're getting a good deal, you need to know a little bit about lot loans and how they work. This means you have to do homework the old-fashioned way. Now, here's another word you need to get used to. It will be worth it once you've found the good deal and gotten rid of the bad ones, saving you thousands of dollars.
Have a savings plan ready
You can find lenders who will loan you up to about 90% of the price, but you will get a better deal and lower interest rate if you can pay at least 20% of the loan to value (LTV), but you don't want to pay more than 35%. You probably won't get a loan if you fall outside of these two ranges.
Set a date to start building your house.
Most lenders won't talk to you about a lot loan unless you have a date to build your house within 5 years of buying the land. Having a set date will make it more likely that your lot loan will be approved. Many of them will be happy to talk to you if you tell them you want to change the loan into a construction loan and then into a first mortgage. You can also save money by going this way.
figure out the best type of loan
If you know the difference between a fixed-rate mortgage and an adjustable-rate mortgage, you could save a lot of money. Even though the interest rates on both are fixed for a while, one will do better than the other depending on how the economy is doing.
Get Online Estimates
Most mortgage companies, as well as other lenders and brokers, have websites where you can get free mortgage estimates. If you go to some websites and type in some basic information, you can get results from many different mortgage lenders. Though, keep in mind that online estimates are just that: estimates. For a company to figure out how much a mortgage would cost, they have to look at your credit score and do a physical appraisal of the property.
Estimates Need to Be Broken Down
Try to separate the estimates you got into the loan amount and any fees. Then, compare each of these to the same type of loan, such as a fixed-rate mortgage or an adjustable-rate mortgage.
Negotiate
When you think you have found one or two good companies, you can look them up on the Internet to make sure they are good. Then talk to them and see if you can make a deal that is even better than what was offered. A little hint: you should focus on the fees.
Lastly, be aware of ERCs, which stand for Early Redemption Charges. If you decide to pay off your mortgage early, these things will keep you from making real savings. In other words, it costs money. Add it to the negotiation process, and if they won't take it off, there are other things you can do.
