If one of your life goals is to build the house of your dreams, those dreams could begin with buying the land where your home will be located. When you find the land you want, it might be possible to buy it without putting down any money. Since this is a nontraditional mortgage, it's important to be aware of the different products and services offered.
Things You'll Need
* List of Assets
* Bank Account Statements
* Tax Returns
How to Buy Land With No Money Down
Decide how much land you would like to purchase. The amount of the money you borrow will be directly connected to the size of your lot, as well as its location. Since you are not providing a down payment, it's best to look for a smaller plot that won't cost more than you can afford to pay in the future. Research land in the area where you think you want to live, and narrow your choices down to three or four plots.
Look carefully at your credit report. The government mandates a free credit report for every consumer each year, and you can find a copy of yours at the site below. Pay special attention to any late charges (30 days, 60 days, 90 days), judgments, and other negative information. You'll need to show evidence that you've cleared up any judgments or charged-off accounts. In order to qualify for a no-down-payment loan, you will probably need a credit score above 700. If this isn't the case, you may need to delay your purchase, while you spend time repairing your credit or saving a down payment.
Research lenders that specifically offer no-money-down mortgages on land. A good place to start is at your local bank. Most banks have stringent guidelines, but some offer "construction loans" that will give you money to buy land and begin construction. Banks will also be able to refer you to reputable lenders in your area. Some lenders do not offer loans on land with no structures, so research the correct lenders. Review the profiles of any potential lenders by checking them out on sites such as the Better Business Bureau and RipOff Report. If you find negative feedback about these companies, you might want to avoid them. Apply to three or four lenders after conducting your research.
Prepare to show evidence of your commitment to repay. If you've had trouble paying debts in the past, discuss the issue with your loan officer. Bring your lender evidence of your assets. With only land to secure a large sum of money, a lender will probably want to see that you have other assets, in case you default on the loan. Such assets include boats, other property, retirement plans and collectibles.
Accept the loan that best suits your needs. If you are offered a no-money-down loan that has an interest rate or fees that seem out of reach for your finances, it's best not to proceed. Be comfortable with your decision, even if it means your dream house may have to wait a little longer, until you can secure affordable financing.
Find a piece of property that's well within your budget. A no-money-down loan will inevitably offer a higher rate and fees.