Want Your Own Bit Of Land But Have Some Messy Credit? What Are Your Options?
If you're tired of paying lot rent to a manufactured housing community or just want your own piece of property to construct your dream home or park an RV, you may be worried about your ability to finance a land purchase if you don't have perfect credit. Fortunately, there are a number of alternative ways to finance a piece of property other than the traditional mortgage requiring a hefty down payment and which is often available only to those who don't have a foreclosure, bankruptcy, or history of missed payments. Read on to learn more about some of your land financing options that may be available despite your credit.
USDA housing loans
In certain rural areas, land prices are so low that the government wants to encourage settlement in these counties — offering low-interest home loans to homeowners with low income and moderate to poor credit through the USDA program. Although the USDA doesn't lend money directly, it does back these loans with a guarantee, making it a much lower risk for lenders and allowing you to receive loan terms usually available only to the most qualified borrowers. Purchasing a home through the USDA loan program is similar to most other purchases, and will provide the seller with the full purchase price (including the mortgaged amount plus your down payment) at closing. You'll then make payments directly to your lender.
Land contracts
Some sellers are willing to carry their own mortgage — acting as the lender by essentially entering into a rent-to-own arrangement with a prospective buyer. This allows you to make monthly payments and eventually own your home, just like a traditional mortgage, without requiring you to jump through all the documentation hoops required by banks and credit unions.
Entering into a land contract can have some risks, especially if the property is already subject to a bank mortgage. If the seller stops making mortgage payments (even if your own remain timely), you could be evicted in a foreclosure without much advance notice. Depending upon the income taxes, property tax exemptions, and other legal declarations the owner has made over the years, you may have no right to the property upon its sale, even if you've been making payments for decades. You'll want to seek the advice of an attorney or financial professional (like a certified financial planner) before signing a land contract to ensure all your homeownership rights are protected.