Although it would seem like all real estate transactions are the same, there are actually some significant differences between buying a house and buying vacant land. If you are thinking of investing in land near Jacksonville, Florida, there are some important things that you should be aware of.
One thing that often catches people by surprise is how difficult it is to get approved for financing for vacant land. Banks are often hesitant to give people loans for raw land. With a traditional mortgage, the house acts as collateral for the loan. People are unlikely to default on their loans, simply because they don’t want to lose their primary residence. There is a lot of incentive for them to keep up with their payments since losing their house can be devastating.
Even though raw land also acts as collateral for a loan, people have a tendency to default on land loans a lot more often. They don’t have as much to lose if they stop making their payments since they won’t wind up getting kicked out of their home like they would if they defaulted on a traditional mortgage. As a result, land loans are considered to be higher risk than home loans by banks.
To compensate for that, most lenders require a much higher down payment for land than they do for houses or other types of real estate. In fact, many lenders will require you to put as much as 50% down on the land before approving your loan. The way that they see it, this makes borrowers less likely to default since they have a lot of skin in the game. Nobody wants to lose out on such a major investment, making it more likely that they will keep up with their payments.
Another thing to keep in mind when buying raw land is that you need to think about access. Is there already a road to the land? If not, can you build a road to it? The last thing that you want is to buy a piece of land that you can’t access.
Finally, another consideration when buying land near Jacksonville, Florida is whether or not you can easily get utilities to the property. Find out what your options are in terms of water, power, and sewer before purchasing land to make sure that it can eventually be developed without running into any major problems or unexpected expenses.