Southeastern Land Group agents have been receiving a significant increase in the number of property inquiries from individuals looking to make their first land purchase. This recent influx of prospective buyers is great because we have hundreds of properties across the Southeast for them to choose from. There are some questions that we get from almost every new prospect, and maybe they will be helpful as you begin your search.
Who finances land? This is the number one question I get from first-time land buyers. In Alabama there are two main lenders that specialize in making loans on rural acreage: First South Farm Credit and Alabama Ag Credit. Traditional mortgage lenders are not accustomed to making loans on more than 5 to 10 acres. Occasionally a credit union can offer some competitive loan options, but these land lenders are chartered by the federal government to make these types of loans.
How much down payment do they require? Land lenders typically require a more substantial down payment than home mortgage lenders, usually requiring 15% to 25% of the purchase price to be paid by the buyer at closing. This usually comes as a big surprise to first time buyers who are expecting to put 5% to 10% down. It is good to know how much down payment your lender is going to require, so you can calculate how much you can afford.
Land Lenders can be Flexible. A good loan officer will ask you lots of questions about your particular situation, in order to find the best option for your land purchase. In some instances a lender will accept a property you own outright as collateral in lieu of a down payment. If a property you are considering purchasing has a valuable stand of timber, it is possible to work a deal with your lender and a timber buyer to sell some of the timber and reduce the amount of the loan you will need. This is an area where the Southeastern Land Group Timber Division can be a real asset to provide timely advice about your timber options.
Research your lending options on the front-end. I recommend contacting multiple land lenders early in your property search phase. This allows you to be armed with the knowledge of what you are capable of purchasing. We have recently had a couple of prospective buyers make offers, and then have to withdraw them almost immediately when they realized they could not meet the lender's criteria for the loan. Be prepared to provide your loan officer a W-2 or other relevant financial information. They will need this to get the ball rolling for you.
