Can I Buy Land Now and Build Later?

We recently interviewed Alyssa Hartzell, loan officer with Horizon Farm Credit.

Many people ask the question if they should buy land now to build their home later, or if they should just wait and do both at once. What guidance do you give potential borrowers when they ask you this question?
It’s really up to the potential borrower about what works best for them – either buying the land now and building in the future, or doing both at once. 

There are lots of reasons why someone may be ready to buy the land but not build on it right away. Perhaps there’s a perfect property that comes up for sale and you don’t want to lose it, so buying the land now and building later makes sense. From a financial perspective, it may be much more feasible to split up the investments and have time to rebuild your savings before being ready to build.

Perhaps most importantly, waiting provides time to figure out the property, find your ideal building site and shop around for builders that will make the construction part of the process easier. Customers can work with a lender to do the land loan first and then combine any balance into a construction loan when they’re ready to build. Your lender can work with you to see what options make the most sense and go at your own pace to see your country living dreams come true. 

What if a person wants to buy the land and build a new home, all at the same time?
If they do, that’s completely fine too. Home construction loans can allow the borrower to buy both the land and construct a home, all at the same time. This scenario may be a bit more efficient in the long run – saving some fees and doing one closing – as compared to buying the land first and then building. But it’s important to be financially prepared. That typically means having a good nest egg and savings. Also, you’ll need to have your house plans all sorted out and a builder all lined up to start right away.

No matter how they approach it, building now or later, what other advice do you have on buying land in the country?
It's important to think about things like access to utilities and roads, zoning, permitting and restrictive covenants and deeds. Some properties could require long driveways or have expensive fees to connect to utilities. Others may specify the type of home that needs to be built on the property. You want to know this information upfront so you're aware of any major investments that might increase your cost of construction. Talking with the seller, your real estate agent, and township municipal office are all good resources. 
Additionally, I encourage all potential buyers to not only consider your needs today, but what your needs will be for the property in 10 years. Purchasing land is an investment and it's important to make smart choices and purchase a property that will meet your needs as you and your family change.

Is there anything else you’d like to share with us?
I want to emphasize the point that it’s important for you as the borrower to be comfortable with their decision on when and how to buy the property and build a home. It’s also critical that you work with a lender who understands your needs. At Horizon, we work with customers to help them through this process, step-by-step.

I am one of several loan officers who specializes in home and land loans for Horizon. If you are looking for property in central, western or northern Pennsylvania, reach out to us to help. We can talk through your options with you to determine what is best for your situation and help your dreams come true.

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