Making a Land Purchase

In my neck of the woods buying land to build your own home is very challenging. It is like finding a needle in a haystack. Given the scarcity of building lots, they are super expensive when you do find one.

Buying land with the intention of building your own home is not for the timid of heart. You really need to know what you're doing or you could make a substantial financial mistake.

When purchasing land you have to do some detailed due diligence. There are many things people don't think about. Will the land work for the type of home you would like to build? Understanding how big a lot you want will be essential.

Some people think they want an acre or more and then realize there is more maintenance than they considered. A lot of folks don't realize just how big an acre is until they walk a property. Once you've nailed down the size of the land, you'll need to make sure it has the appropriate improvements.

For example, are their proper utilities serving the property? Is there public sewer or do you need to install a septic system? Does the land have any conservation that could restrict building in a certain location?

These are critical questions that need to be answered before moving forward. You could find yourself stuck with a worthless piece of property or one where you can't do the things you expected. Finding this out would likely be a financial nightmare. Don't think it can't happen because it does!

Once you have square away this portion of your due diligence it is time to move onto the financial aspect of acquiring the property.

Financing is also a crucial piece of the puzzle. Not every traditional lender does land loans. You will need to find a lender that does land loan financing. Be prepared to put up a minimum of 30 percent of the purchase price - down payment requirements are different than when buying a house.

If your plan is to build right away and land loan won't be the best choice. You will want to get a construction loan. A construction loan will allow you to roll the land purchase and house construction costs into one loan.

When you are interested in buying land it is wise to find a buyer's agent who has experience with land purchases. They will be able to guide you given the complexity of the transaction. Most agents who work in the new construction end of the business will also have a grasp of land purchases.