Many people use borrowed money to purchase rural land.
If this fits you, we suggest your first-step be to obtain a “pre-qualification letter” (PQL) issued by a commercial lender.
The benefit to you of a PQL is that it puts you in a strong position with potential sellers. Every landowner (seller) entering a contract contingent on financing fears the buyer may prove incapable of closing the deal. A PQL let’s a seller know you are likely financially capable of closing a loan.
In fact, at Cyprus Partners our clients are encouraged not to enter into a contract contingent on financing (or agreeing to “seller finance”) if we don’t have a PQL in the file.
A PQL is easy to get (takes a day or two) and does not require you to identify a property you intend to purchase. You’ll have to provide the bank with a couple years of tax returns and a financial statement. Banks are happy to give you a PQL because they want your business if you borrow money.
A PQL is not a loan commitment. It is simply a letter that says the bank will lend you money (up to a certain amount) if the property you eventually identify passes appraisal.
A detailed discussion of the pros and cons of borrowing money to buy rural land is discussed in detail in our e-book available here.