If you read my post a couple weeks ago about Project Dream Home, then you know that Delaney and I recently purchased a piece of land, and we will be building a house. Today I’m sharing the process of purchasing the land with you.
You must have your land purchased before you start building your house because there are so many things that have to get completed before the building can even start. However, land purchases are quite a bit different than buying a home. Just because you’re approved for a certain amount to purchase a home, doesn’t mean you’re approved for that amount to purchase land. When you purchase land they take into consideration the rent you are currently paying (or the mortgage of your current home) as well. Because, when you buy just land, you can’t move in right away as you would if you were buying a home. So land is considered a second home. To buy land you are also required to have a lot more money down. These days you can get approved to purchase a home for as little as 1% down. Delaney and I were approved for a home purchase such as this. However, with our land purchase we had to put 20% down. And, 20% down is the least amount you can put down on land. Some lenders want you to put more down, such as 30 to 40%. Your income and savings also play a huge role in your down payment requirements. So, if you’re thinking of buying land make sure to ask all of these questions, and ask your lender what you are approved for based on your personal income and savings. Just because the standard is 20% that doesn’t necessarily mean that would be what you qualify for.
There are only a few banks that even offer land loans. US Bank is one of them, and that’s who we got our land loan from. You may have different options with smaller banks in your area as well, but US Bank is one of the only major bank chains that offers this type of loan. Land loans are more risk for lenders, and that’s why many banks do not offer them. Once you talk about your options with your bank, they will provide you with a pre-qualification letter that you can give to your real estate agent. Then, you can start looking at land.
Looking at land is so much easier than looking at houses! You don’t even have to have your agent go with you because there’s nothing to get into, no keys needed or anything. You can simply drive by. Delaney and I looked at all the land on our own without our real estate agent. She provided us with the addresses and price points of the lots, but we looked at them at our leisure when we had time. So what are you looking for when you’re just looking at vacant lots? A few of the more simple things to consider are location, the size of the lot and how much work will have to be done before you can even start building. Just because you buy the land, doesn’t mean you can start building right away. In Mammoth especially, there are so many lots that are on hills. This requires extra work to take down trees, carve out a portion of the hill to shove the house into, or it would require the house to be on stilts. So, one of the major things we were looking for was a flat lot. We knew that this would save us time and money in the long run because less dirt work would be needed before building. Also, we wanted to have a yard for Otto and when you live on a hill, a yard is something that’s very had to have.
Another thing you may not think of is to find out if the lot you love is located in a neighborhood with any sort of HOA or rules. You’ll want to make sure you check those out before purchasing the land to make sure you can actually do what you want. The neighborhood we purchased our land in does have an HOA. So, I found their website and read all the rules. Once I was okay with the rules, I even reached out to the President and had him into the bake shop. We discussed our plan for the piece of land with him over cookies, before we even made an offer. If you can’t do what you want on your own property, then there’s no point to buy it. You may find you can compromise on some of the things you originally wanted if you really love that lot. Luckily for us, the HOA in our neighborhood is pretty simple with simple rules that can be easily followed and really promote having a great looking neighborhood.
So, once we did all of our research and were positive we wanted to live in that neighborhood, we made an offer on the land. We went back and forth a few times with the buyers, finally agreeing to their counter. Our real estate agent suggested we do a 30 day escrow, as it’s more appealing to a buyer. Because we didn’t have to worry about selling our house or moving it was easy to agree to that. After signing what seemed like a million pieces of paper and docusign’s, we are now officially land owners. We set up our mortgage with US Bank to automatically withdraw from our account each month. This was the first step in a what is a big process. Stay tuned for what to do after you have purchased your land.