Get the inside scoop on lot loans and start planning your new build today.
In our latest real estate video blog, we had the pleasure of speaking with Tim Lammers from Waukesha State Bank about lot loans—a critical topic for clients looking to sell their home and build a new one. Here’s a detailed overview of our discussion.
What are the normal terms of a lot loan? This type of loan is typically temporary, lasting either one year or three years. The key aspect of these loans is that borrowers should have the intention of building on the lot within that initial period. Although the term is short, the loan is amortized over either 20 or 30 years, which affects the payment structure. This means that while you have one to three years to use the loan, your payments are calculated as if you were paying off a 20 or 30-year mortgage.
One of the standout features of the lot loan program at Waukesha State Bank is the down payment requirement. Unlike many lenders that demand a significant down payment, Waukesha State Bank allows borrowers to put down as little as 10%. This makes it more accessible for those looking to purchase land with the intention of building.
“This type of loan is typically temporary, lasting either one year or three years. ”
To qualify for a lot loan, a minimum credit score of 661 is required. Given that this is a portfolio loan, every application is underwritten on a case-by-case basis. This individualized approach means that borrowers with unique circumstances can still be considered for a loan, provided they meet the fundamental criteria.
Applying for a lot loan is very similar to applying for a traditional home loan. The process includes obtaining a tri-merge credit report and providing necessary documentation such as W-2s, pay stubs, and asset statements. An appraisal of the land is also required, even though it’s currently just a piece of dirt. This thorough approach ensures that all aspects of the loan are handled with the same level of diligence as a home purchase.
Lot loans are a valuable option for those looking to purchase land and build their dream home. If you have any questions about lot loans, don’t hesitate to give Tim Lammers at Waukesha State Bank a call. For any real estate market queries or advice, reach out to us!
