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Mr. Twister

Anybody know anything about financing land?

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I would like to buy some hunting land in the future and am trying to learn about finaning options. I am wondering what is typically required for a down payment and what are the terms (for example how many years and what percentage rate.) Most of the banks I called in the cities told me they typically don't like to finance hunting land and that I should contact a bank in the area I am condidering buying in, as they would be able to give me a better rate.

I was told by my credit union that they would only give me a hunting land loan if I purchased over 40 acres, the loan would be for 12yrs with 20% down at 9% interest which seems high as home mortgage rates are hovering around 4%.

Is there anybody out there that has recently purchased land that could tell me what reasonable terms are on hunting land in our current economy?

Any advice would be greatly appreciated as this is something I have never done before and don't want to screw up.

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Right now, there are fewer lenders out there who are anxious to finance recreational land. First off, you need to find a lender who will. Terms that I would consider "usual" are 20% down and and either a rate about double the mortgage rate OR an adjustable rate. You may be able to find land Contract for Deed which may be of interest, otherwise, if you are in a good spot with your mortgage or have your home paid off you could take a loan out against your home, which would allow you a better rate, but you have to have the equity for it and these days, most people don't. Financing land can be tricky, but there are lenders out there who will do it, just make sure you do some shopping...

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AGSTAR Financial Services does hunting land loans. Just saw an ad in my Wisconsin Outdoor News. Ad says to visit BuyRetreat.com to download a free copy of "Buying Land in the North Woods: 10 Steps & 10 Tips".

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Many sellers today are willing to finance the sale. Contract for Deed is a good approach. You can expect to put 15-20 percent down with the remainder amortized over 30 years with a ballon due in 7 years. This gives you a lower payment for the first 7 years.

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Thanks for the advice I will take a look at these suggestions.

I don't know about a balloon that would make me kinda nervous.

Thanks,

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I would advise against a Contract for Deed. To many horror stories. Buddy almost lost his cause the owner wasen't making his payments to the bank and went foreclosed...way to risky!

One missed payment and the property is bye bye!

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I just closed on a property that I used Agstar to finance.

Tips:

Buy land well below tax value. Agstar will allow you to calculate your downpayment on appraised value, not purchase price. In other words, if you buy cheap you may not need ANY downpayment.

Having tillable acreage for income makes it easier to get your loan approved.

You can expect rates about ~2% above prevailing mortgage rates. Not too shabby.

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Consult a lawyer on the CD and make sure that all the proper paperwork is filed with the Registrar of Deeds. If there is a third party that is handling the transactions you need to make sure that the payments are being made and that any escrow is in a trust account at some bank. Set it up right and it can be less of a hassle/risk than dealing with some banks.

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Pulleye16, you are right about this caution for a CD. I was assuming the seller did not have a loan against the property. Make sure your CD has a clause for no penalty for early pay off. Then you have 7 years to set up alternate financing, including extending the original CD. I have bought and sold several properties on CD. I recomend using a closer for the transaction. The will ensure the correct paper work is done and can order the title search etc.

Good Luck on your propery search.

P.S. The neighbors have an 80 with cabin. It's not listed but they are selling. It's located in SE Morrison County. (check my post in deer hunting for pictures of our hunt this year)

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I have been in mortgage banking for 15 years. In most cases, Agstar is a great option. The other would be just what you are being recommended to do from you local lender in the cities, using a small, local bank.

I may be biased being in the lending game, but contract for deeds can be scarey. If you do consider one, spend the money on a real estate attorney, not just anyone from the yello pages or your cousin who just passed the bar, but a real estate attorney that deals in that county.

You can call around to title companies, or even appraisers in the area you are looking for land and ask who seems to be financing the local recreational land, and if they have any recommendations. Most will be nice, some won't.

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Good piece of advice on getting professional help. A local real estate attorney can make things go much more smoothly.

You really want to understand EVERYTHING and I mean EVERYTHING about the land you are purchasing, particularly with rural property. This ain't your simple suburban lot with a house on it. Do you have legal access across proper roads? Do you own the road that goes along the land, or is it owned by the State/County/whomever? Is there a County or Judicial Ditch in the neighborhood - which means an assessment for ditch maintenance at some point? Are there easements affecting the property - such as maybe a USFWS conservation easement (not uncommon) or utility or roadways or field access, or drainage...... Where are the actual boundaries? How come there is a 4-wheeler trail going diagonally across the property? Have the mineral rights been severed - and if so could that potentially impact you at some point? These are all examples of questions you NEED to understand.

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A friend bought a piece in Mahnomen County last year. The sellers attorney was a piece of work. He sent documents that had at least a dozen errors, failed to include things like well disclosures and the existence of a DNR easement and then proceeded to collect signatures from the 5 owners on separate documents and then change the documents without getting new signatures. The advice to get a local real estate attorney is good but you also have to make sure that the lawyer knows what needs to be done and does it correctly. The OF involved in this transaction should lose his license.

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I have a cousin who is a banker and I currently do not own any land/house. I asked him about purchasing land for hunting.

Land without any income (Tillable acres/CRP) a bank will need 30-40% down and he can do it for 20 years. I didn't talk interest rates but he said most banks in NW MN wont take the risk without 35-40% without knowing the customer better. He also said if its a good property and decent price he could possible get the down payment down to 30% but that was because we are family. Where I'm looking is about 1k/acre so if I want some decent land I better start saving up big time.

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Very good advice Jackpine Rob. I didn't want to imple you just grab a CD off the wall and go, althought I must admit, I wrote the one for the first piece of property I purchased. However, it was from a relative. The things you mentioned are very important issues and should be given full attention prior to any land purchase.

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