To buy vacant land in the mountains, cash is best for prices under $100,000. Getting a loan for prices under $100,000 can be challenging and expensive relative to the purchase price. I recommend contacting the local bank in the area of the land purchase and inquiring about their vacant land loan programs. Owner carry is a popular option. This is when the seller acts as the lender.
Regarding Owner Carry options. Typically the seller will indicate they are interested in owner carry (acting as the lender for the buyer) and offer acceptable terms for down payment amount, minimum credit score, length of time the owner will carry the loan, interest rate of the loan, amortization term, and balloon payment requirements.
Some typical terms for an owner carry:
Down payment amount: 25 – 35%
Interest rate: 6 – 9%
Credit score: minimum 700
Term of loan: 3 – 5 years with a balloon payment due at end of term
Amortization term: 10 – 15 years (this can be adjusted to create an acceptable monthly payment amount, the balloon payment increases as the term increases since less is being paid each month)
Balloon payment: amount due to pay the note in full at the end of the loan term.
An attorney will be required to create the promissory note and deed of trust for buyer and seller to review and approve. The buyer is typically restricted from making any changes to the land – ( ie. drilling a well, installing a driveway, excavating a homesite) until the owner carry note has been paid in full.
To quote Mark Twain: “Buy land, they’re not making it anymore.”
Plus: It is awesome to say you own some dirt in the Colorado Mountains !
Brenda Kellen, Broker Associate
Keller Williams Top of the Rockies