Country Minute: Finding the right lender for your next home or recreational land purchase
9/15/2022
Brent Voss, Vice President of Lending
Fall woods and water scene

 

Whether you are hoping to settle down in a new home in the country, purchase a second home for weekend getaways or hunting season or are looking to buy an empty plot of land, there are five main things to consider when looking for the right lender.

 

As we dive into those five topics, it’s important to also recognize there are different types of loans based on the type of property you are seeking, which fall primarily into three categories: Primary residence, secondary residence and vacant land. The type of land you are purchasing will determine the stipulations and guidelines you will need to follow to secure the loan – and those guidelines vary based on what lender you choose. 


Down Payment

In doing your research, find out from each lender what down payment percentage you will need to pay upfront to secure the loan. The amount you must put down up front diminishes your cash on hand, and therefore should be acknowledged early in your evaluation as you consider other projects you have in mind for the future. Oftentimes, the down payment depends on the type of loan – and that is based on the type of land you wish to purchase. 

 

For example, if you are looking to purchase a home as your primary residence on a plot of land, GreenStone requires you pay a minimum of 5% of the purchase price as a down payment on the loan if you use  private mortgage insurance (PMI). This number changes if you are purchasing a secondary residence or vacant land, or without PMI. Each lender will have different down payments for each type of loan. It is always important to ask how much you need to contribute right away to secure your loan.


Building Timeline

If your plan includes buying the land with a land loan and then construction of a home or pole barn, it is important to recognize that each lender could have different requirements for the amount of time you have to start, and complete, the building process. This is something to consider if you are purchasing a vacant piece of land with no home or building on the property currently. This could impact the type of loan – or loans – from your lender and what their process is for each. 

 

GreenStone loan options do not have time constraints on construction, meaning you have as much time as you want to build your dream home or vacation getaway on your land. 


Fixed vs. Adjustable Rates

You should always consider the loan product a lender is offering – fixed or adjustable.

 

A fixed rate is a set rate of interest that does not change throughout the life of the loan. An adjustable rate rises and falls  throughout the life of your loan based on market rates.

 

A third loan option some lenders may offer is a fixed rate that adjusts once after a certain number of years, called an adjustable-rate mortgage, or ARM. A common example GreenStone offers is an adjustable-rate mortgage 5/25-year loan. For a 5/25 loan, the interest rate will be fixed for the first 5 years then adjust once to the current  25-year fixed rate. Many people may choose this option is they are planning on  building  a home within the first five years. 

 

You can learn more about which option may be best for you in this blog.



Size Matters

Some lenders may have a limit on how small or large your land can be. This typically goes by acreage.

 

Many lenders specialize in smaller parcels, and may only be able to provide land loans for property up to 5 or 10 acres. Thanks to GreenStone’s 105 years of experience with rural properties, we have the expertise to evaluate and support all types of vacant land  purchases from small lots to unlimited acreage parcels. 


In The Zone

All property is zoned by local government for its primary use. Rural land often falls in either residential or agricultural zones. Many lenders will use how it is zoned to determine if you are eligible for certain types of loans. Some lenders might find issues if land is marked as an agricultural as opposed to a  residential zone.

 

Greenstone does not restrict loans based on what type of zone the property  is located in.  We even understand how specialized zoning like conservation easements work.  This is where there are usually several stipulations on what the land can be used for and limited building sites or use opportunities for the land.  


As a consumer, it’s hard to know all the considerations that go into a loan decision, that’s why our team of loan experts work with each customer to understand your unique plans to help us offer you financing options that best align with your goals. But no matter which lender you consider working with, it’s always important to do your research, ask questions and find the lender you are comfortable working with who can fulfill your specific needs.

 

When you are ready to apply for a country living loan, get started with GreenStone through our convenient online loan request here. You are also always welcome to call one of our offices throughout Michigan and northern Wisconsin to ask questions. Our knowledgeable financial services officers will be happy to answer any questions you may have!  

 

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