I’m Ted Thomas, and today I’m answering your question about how to buy land with no money down. I’ll cover options like seller financing, USDA and VA loans, and I also want to tell you where you could purchase land for 60%, 70%, or 80% less than the tax assessed value.
For the past 30 years, I’ve been involved in a subset of the traditional real estate business. This subset of traditional real estate is the same type of property, except the owners have failed to pay property taxes. These are referred to as “tax-defaulted properties,” and the local governments would like to get rid of them so they sell them for the back taxes.
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Purchasing vacant land to build a homestead farm or ranch is often the first step in living a rural lifestyle. However, coming up with a large down payment can be a major barrier for many hopeful landowners. The good news is that with the right programs and strategies, you may be able to get financing and buy land with little or no money down. This guide covers different options for getting a zero down payment land loan.
USDA Land Loans
One of the best options for financing land with no down payment is a USDA land loan, The US Department of Agriculture has loan programs intended to help low- to moderate-income buyers purchase and develop rural property
There are two main USDA loan programs that allow zero down mortgages on land:
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USDA Guaranteed Loan Program – Allows up to 100% financing from an approved lender. No down payment required. Credit score requirements vary by lender.
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USDA Direct Loan Program – Direct loans from the USDA for up to 100% of appraised value. Must meet income eligibility limits. Credit score minimum is 640.
In addition to 100% financing, USDA loans offer:
- Low fixed interest rates, currently around 3%
- Low mortgage insurance rates
- Flexible credit guidelines
- No prepayment penalties
To qualify for USDA 0% down financing, the land must be in an eligible rural location, defined as populations below 35,000. The property must be intended for personal use, like a primary residence or farm.
USDA also provides construction loans that allow you to buy the land then later finance building costs.
VA Loans
Veterans and active duty military may qualify for a VA land loan with 0% down. VA loans are backed by the Department of Veterans Affairs and offered through private lenders.
VA land loans provide:
- 100% financing with no down payment required
- Limited closing costs
- Competitive interest rates
- No monthly mortgage insurance payments
Borrowers must meet VA eligibility requirements related to prior military service. VA loans can only be used for a primary residence, not investment property. Land must be in a location that allows residential building.
Owner Financing
Another way to buy land with minimal money down is getting owner financing from the seller. This involves the seller providing you land loan financing instead of going through a bank.
With owner financing:
- You make a small down payment, like 10%-25%
- The seller finances the remainder of the purchase price
- An installment land contract outlines the financing terms
Seller financing allows creative down payments, like trading labor. You avoid bank qualifying criteria. Monthly payments go to the seller instead of a lender.
Downsides are that terms are set by the seller, and there can be less buyer protections than traditional loans. Make sure contract terms are detailed and you get title insurance.
Buying Tax-Defaulted Land
In some states, you can buy land auctioned for unpaid property taxes with no money down. When owners don’t pay property taxes, the county can seize and auction the land to recover unpaid taxes.
Benefits of tax sales include:
- Little or no competition from other bidders
- Auction properties sold free and clear of any mortgages
- Low opening bids, sometimes just a few hundred dollars
- Buy land far below market value
Check tax sale rules in your state. Sales are usually cash only but some states may finance back taxes with payment plans. Tax auctions involve risks like unknown title defects.
Tips for Getting a $0 Down Land Loan
If you want the best shot at getting approved for a no down payment land loan, keep these tips in mind:
- Shop multiple lenders to compare rates and terms
- Look for owner financing from motivated sellers
- Consider government loan programs like USDA and VA loans
- Build up your credit score before applying
- Lower your debt-to-income ratio
- Get preapproved to show sellers you can secure financing
With the right loan program and preparation, you can buy your dream property now and start building your homestead without draining your savings on a down payment.
Alternative Low Down Payment Options
If you can’t quite swing 0% down, here are some other ways to minimize your down payment when buying land:
Low down payment conventional loans – Some lenders may offer land loans for 5% or 10% down to qualified buyers, though these are less common.
Land contracts – Make a small down payment to the seller, who finances the rest in a private loan. Down payments are often 10%-30%.
Owner will carry – If the property has existing financing, ask if owner will carry over their current mortgage when selling the land to you. This avoids new qualifying and down payment requirements.
Sellers pay closing costs – Negotiate for the seller to cover all or part of the closing costs on your land purchase to reduce your cash needed at closing.
Secured credit cards – Use low-interest rate secured credit cards to help cover down payment funds and closing costs. Just be sure you can pay off the cards responsibly.
Personal loans – Banks and credit unions may provide personal loans for a land purchase, which spread the down payment amount over time.
Cash-out refinance – If you have equity in an existing home, a cash-out refinance could free up funds for a land down payment.
Retirement account loans – You may be able to borrow against your 401(k) or IRA to come up with the down payment while avoiding taxes and penalties.
Family gifts – Ask family members to gift funds for the land purchase. Lenders allow gifted funds so long as they are sourced properly.
The Bottom Line
Creative financing like USDA and VA loans means purchasing land without needing large down payments or perfect credit is possible. With the right approach, you can start building your dream homestead or farm this year without breaking the bank on a 20% or 30% down payment. Just be sure to shop multiple lenders, compare loan costs, and verify you understand the risks before purchasing land.
USDA or VA Loans for Land With No Money Down
Here’s a way to buy land with no money down. Two distinct programs stand out, USDA land loans and VA loans.
The United States government grants eligible buyers the opportunity to buy land and build on that land, if they are doing so in a remote area.
These are little-known Department of Agriculture loans, which encourage people to own homes and tracks of land for farming. The department of agriculture will offer 100% loans for buildings in rural areas.
Additionally, another zero-down loan will come from the Veterans Administration. This is a loan which Is guaranteed by the United States Veteran Affairs for people who have served in the military. The objective of the loan is to help military people to get started.
It is not easy to purchase land with zero down payments, especially raw land. These loans when they are made have high-interest rates and require special skills for the purchaser in order to pay the high-interest rates.
No Money Down Owner Financing
Let’s talk about how to buy land with no money down. Some land owners will be willing to offer financing to buyers.
What is the lowest down payment for land? When it comes to land, in many instances, the expectation of the seller is a huge down payment of 30% or 40%, and many are willing to carry or be a mortgage lender for the remaining balance of the purchase price. The document that is used for this type of sale is referred to as a Land Contract or a Contract For Deed.
Generally speaking, loans are difficult to obtain from a local bank when they are aware that the loan is for land. Bankers feel the risk is too high.
Though it’s not unusual for a seller to request a down payment that is high, sellers are motivated in high-interest markets to accept installment sales. It may be possible to negotiate a contract with the seller for no down payment.
Many in the market are searching for a low or no down payment. With the seller acting as the banker, these are rare in good markets because they are the only financing in poor real estate markets.
Buildable residential land can be readily purchased and financed with payments because it’s easily sold and has considerably higher value. However, it is commonly sold with 20%-25% down payments and long-term financing of 10 years.
How to Buy Land with No Money Down
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