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Difference Between A Home Loan And A Land Loan In California

All California Lending has years of experience in the industry. Call them at 877 462 3422 to learn how they can assist with your land loans in California.

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Difference Between A Home Loan And A Land Loan In California

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  1. Do you know the difference between a home loan and a land loan in California? Of course the simple answer is that a land loan is for land and a home loan is for a home, but there are more nuances to that simple answer. On a home loan, the leverage you are able to obtain with regards to financing is much greater than that of a land loan. This is due to the desirability and salability of a home. For private money loans, the investors always consider what they would do if they had to take the property back due to non-payment. On a home if they must take it back, there is a viable market where a well priced home can be sold in a matter of weeks. Land, on the other hand, has a much different market. If you have to sell your land today, simply listing it for a below market price is not enough to get it sold quickly. It could take months to sell land. In a down real estate market, it could take years. That leads to a second disparity. In a down market, the house values go down. But land values go down more – and they are the last real estate market class to rebound when values are increasing.

  2. Due to these issues, the leverage you can get on a land loan is less than what you can get on a home loan. Most land loans are going to max out at between 30-50% of the land value. Home loans, on the other hand, can go up to 75% on private money loans, and over 90% on some bankable lending programs. Rates is another place you will see a difference. Typical rates on land fall out in the 11-12% range. Home loans, however, can be priced down into the low single digits. When looking for a land loan, there are many considerations that go into whether the loan can be made or not. On a land loan in California, the property type and acreage will have an impact. An infill lot in an established neighborhood that has utility hookups is going to be much more attractive than a loan secured by large acreage in the desert (typically speaking). Loans for raw land might be more conservative than loans for entitled land. Cannabis land loans are another class in and of themselves. When you are looking for a land loan in todays market, oftentimes the ability to just get the deal done is what you need. All California Lending has years of experience in the industry. Call them at 877 462 3422 to learn how they can assist with your land loans in California.

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