Land Development Loans
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Land development loans provide capital for the acquisition of unprocessed land and its development for future sale or construction. Unlike commercial and residential construction, land development aims not to present a completed piece of real estate. It is to prepare the land for further construction. The developments include the creation or the improvement of the surrounding infrastructure and improvements of the land itself.
Types of Land Development Loans
A land development loan generally is given in two forms:
Secured purchase loan – this gives the lender more protection in property working as collateral. It mostly comes with a lower interest rate for the borrower.
Development loan – is quite a straightforward agreement in which the borrower repays the loan with interest in periodic installments.
The borrower can go for land development loans if a piece of land is ready for further development or already developed but needs improvements. This type of loan covers the purchase of land and any improvements needed before the development stage.
Origination of Land Development Loans
A land development loan origination is a various-step process that sums all actions from the application submission to the ultimate payment of funds. It needs a detailed inspection of the backgrounds and qualifications of all related parties. It is critical to remember the estimated market value and the spread between the sizes of the development loan. Both must be sufficient enough to allow for any unplanned spending. Below are the main steps in the application review of the Land development loans process.
Contractor Review
The main contractor involved with the land project will be required to provide detailed documentation. This includes; previous experience, their reputation, and financial standing. This information anatomy proves that the contractor has a proven track record of completing projects similar to the project being assessed.
Borrower Review
Commercial Real Estate Loan Pros of Gainesville will investigate the borrower’s reputation and financial stability. The needed documentation for the land development loans can vary notably between different states and lenders. The process most commonly includes a mortgage insurance and property title search. With unsecured loans, the lender may search for alternative repayment methods besides the awaited return from the development.
Project Review
Before the approval of land development loans, the lender will evaluate the project’s suitability. It includes assessing the market value of the land, both before and after the designed property enhancements. The final amount of the loan will be approved based on assessments made on an “as is” and “as completed” basis. In conclusion, the loan process mainly depends on the features of the land plan for the development property. This is why the loan’s entire process must be supervised by a Commercial Real Estate Loan Pros of Gainesville professional.
The professional must have a great understanding of the necessary steps resulting in the approval of the project. Employing the services of a dedicated construction loan admin will ensure that all bases are covered and will give an application the best chance for approval.
There are so many areas or regions where we offer these services with most of them being cities.
However, if you need any of these services, you need to contact us. The list below comprises the areas where we offer these services.