Building your dream house in Texas is a rewarding experience. But securing financing for buying land can be challenging.
You don’t have to worry: there are financing options available to help you buy land and build a house comfortably. Keep reading to get expert tips from SRC Land on how to finance buying land and building a house in Texas.
Key Takeaways
- Securing a traditional mortgage to buy land and build a house is unlikely, but there are other affordable means to go about securing funding.
- Seller financing offers accessible financing options for purchasing land and negotiating payment terms, including interest rates.
- SRC Land helps aspiring homeowners with flexible land loans and ideal properties in Texas.
How to Get Financing to Purchase Land
There are a wide variety of different ways you can secure finance for buying land in Texas. Here’s a brief overview of how these types of land loans work:
- Seller Financing — Seller financing is a land loan that allows an aspiring homeowner to obtain financial credit to purchase land directly from the seller.
- Home Equity Land Loans — Home equity loans allow homeowners to borrow money by using their existing home as collateral. These loans are available to help them buy land and build new homes.
- United States Department of Agriculture (USDA) Loans — USDA lot loans are specifically created to provide financing for buying land in rural areas and building low-income, multi-family housing.
- Construction Loans — Construction loans are loans that are granted to fund a land purchase as well as development and building costs. When construction is complete, the land loans are then converted into traditional mortgage loans for the repayment period.
- Raw Land Loans – Raw land loans, also known as unimproved land loans, can be used to buy land that doesn’t yet have any utilities or development.
- Improved Land Loans – These types of land loans are used to finance purchases of land that already has some utilities hooked up, as well as road access.
Which Type of Land Financing is Right for You?
When choosing the right land loan, consider factors like the type of land you’re buying, your development plans, and your financial situation.
One great option is owner financing, also known as seller financing. It comes with many benefits, especially if you can’t get a regular bank loan because of bad credit or no credit. Owner financing works by allowing the person selling the land to give you the loan directly. This means you don’t need a bank or a real estate agent to facilitate the deal.
The buyer and seller can also work together to choose the down payment, interest rate, and other terms. With a regular loan, the bank decides these details, but with seller financing, both sides have more control.
Lastly, owner financing is usually faster and easier. You don’t have to wait for long loan approvals or deal with complex paperwork. This makes it a great option if you want to buy land without a credit check.
How To Finance Building a House
When purchasing undeveloped land, you may need land loans to fund the construction process and build your dream home. The financing options available include:
- One-Time Construction Loans — One-time construction loans can be used to fund your land development costs. When the building process is complete, the construction loan is converted into a traditional mortgage, without you having to reapply for a separate loan.
- Two-Time Construction Loans — These construction loans involve two stages. First, you apply for a short-term loan to build your house, typically lasting one to two years. When the building is complete, you then apply for a standard mortgage from another lender to pay off the first loan.
- Owner-Builder Loans — If you’re a licensed builder or contractor planning to build your own house, owner-builder loans offer financing for building a home. However, many land loan lenders find this financing method risky due to uncertain timelines for construction.
- Home Equity Loans – By borrowing against the value of your existing primary residence, you can access financing to build a new home.
How to Save Money on a Land Purchase in Texas
Buying and building your house in Texas doesn’t have to drain your wallet, especially after you’ve determined the best financing option for your project. Here are a few strategies you can use to save money on land for sale in Texas:
- Plan Ahead – Draw up a solid plan that details your intended purpose and includes a clear budget. Also, consider factors like the size, location, road access, and available utilities to keep your search focused and avoid overspending.
- Work With a Land Developer – An experienced land developer like SRC Land can help you get good deals, as they usually have access to affordable plots of land that aren’t publicly listed.
- Apply for Seller Financing– Seller financing helps you buy land at affordable prices and interest rates compared to traditional mortgages.
- Consider Rural or Raw Land– Undeveloped land in rural areas may take longer to build on, but they are often cheaper and can offer great land investment opportunities in the long run.
- Buy Land With Basic Amenities– Alternatively to raw land, buying land with basic infrastructure like electricity, good roads, and running water will save you thousands of dollars in future development costs.
How to Save Money on Home Construction
Building a house in Texas is a significant financial investment, but the good news is that you can still save money without compromising on quality. Follow these tips to spend less when building your dream home in Texas:
- Create a Development Plan – Create a detailed plan of the house you want to build, including essential requirements like materials, professionals, and other costs. Also, avoid making changes to the plan to reduce unexpected expenses in the long run.
- Buy Construction Materials in Bulk – Look for affordable yet durable materials, and take advantage of bulk discounts when you can. Your property developer can also suggest materials that cost less but match your desired quality, and they can connect you with trusted suppliers.
- Work With Licensed Builders – Hiring experienced builders will help you save money and avoid problems by ensuring efficient work and high-quality construction.
- Be Active – Being actively involved in the construction process for your house is not as complicated as you might think, and it can even save you about 20% of your budgeted cost. Additionally, your property developer can help out by getting reliable subcontractors to handle the main construction, like builders and plumbers.
Buy Your Dream Property in Texas with Help From SRC Land
Getting proper financing is crucial for purchasing good land with long-term value and building the house you want. Texas has a lot to offer, and with the right seller financing deal, you can buy a good property and build your dream home successfully.
Find a smart way to secure finance for buying land with SRC Land today and start building your dream property.
