I work in the still growing markets of Wenatchee and Chelan County, where demand often exceeds supply. You may have seen the blog by my friend Perrin Cornell talking about how to best deal with multiple offers. The other side of this is that many people can't find the home they want, so instead they buy a building lot or piece of land to build on sometime in the future.
As financing land is a little different than financing homes, I thought I'd pass along a little information to help keep potential Wenatchee land buyers informed.
The first thing you'll find is that most lenders won't lend on raw land. The main reason for that is, unlike home mortgages, there isn't a huge secondary market where lenders can sell these loans. Of the lenders that will finance land, you'll find a wide range of terms. That's because the lenders are lending their own money, and they want to set terms to meet their own needs of risk and return. No bank wants to capture the entire market in lot loans. Most want to have some nice safe ones that get paid off with construction loans. That's also why many lot loan programs feature Balloon payments; they want you off their books so they can lend the money to someone else. Its just like a restaurant, they are happy you came, but they really need you to leave so they can use the table for the next paying customer.
Most want to see higher credit scores as well. 620 is a standard score for a conventional home loan, but most lenders want to see a 680 score for land.
Lenders also want to see some down payment money. There are plenty of 100% financing programs still available for homes in Wenatchee, but for land, most want 20%-25%, but you'll find some programs that go down to 10% and a rare few at 5% (but you better have good credit and low debt ratios).
So if you have decided on a piece of land, first determine how long you will need to finance it before you plan to pay it off, or roll it into a construction loan. Then shop around for the terms that best fit your needs. If you are financing land in Wenatchee, Leavenworth, or Chelan, you will be able to find an assortment of ARMs (adjustable rate mortgages) which are fixed for 3,5 , or 7 years and then either adjust after that or balloon (depending on the lender). Some are amortized over 15, 20 or 30 years, so do your shopping to find what best fits your scenario. There is even a 30 year fixed lot loan (which completely violates the restaurant analogy).
(For an explanation of ARMs and Balloons, check out Mortgage-x)
Land values in Wenatchee and Chelan are amazing; here are two examples. I am financing a spec home in the Sunnyslope area of Wenatchee, the builder bought the lot for $90,000 in 2005; and the same lots are now going for $200K. I financed a lot purchase on Lake Chelan exactly 2 years ago for $219,000. We just refinanced the lot for the client and it appraised at $600,000 - nice capital gain.
If you need a piece of land right now, my friend Geordie Romer has some nice treed Leavenworth acreage available.
And once you have the land, here is some info on how construction loans work in Wenatchee and Chelan County.
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