Hard money land loans are a unique type of loan. It was not long ago that land loans were not difficult to obtain. The real estate market was booming, and everyone assumed that real estate was the very best place to have your money. Land values were rising quickly, and subdivisions were going up all over.

Then the market changed.

Real estate values fell. This hit land very hard. After all, land is what developers buy to build houses. If there is no profit in houses, there is no reason to buy and build. Not only that, but many builders were left holding the bag as their loans froze their draw accounts, basically killing their developments. This land could not be sold, it was way over encumbered (and no one wanted to buy it any ways as they were not going to build).

Over the past 12 months, things seem to have shifted a little bit. Although home prices are still declining, there is more optimism surrounding real estate than there has been in a while. With this shift has come more interest in land.

With hard money land loans, you should expect a very conservative approach by any lender. The value of your land back in 2007 has no true bearing on the value of it today. Even with a valuation, your loan to value is likely going to be in the 30-35% range. The reason is that no one wants to have to take back and sell land these days.

While the lending is very conservative, the money is there. It is not impossible to get a land loan any longer. The qualifications are more stringent than many borrowers may expect when dealing with hard money. You should expect to have to show full financials, likely tax returns. You will need to show that you can debt service the loan (again, no one wants to take back land). Credit will be a factor to some degree. For those who have been tied up in land and need to free up some capital for their project, this loosening of the purse strings is a good thing.

If you are in need of a hard money land loan, feel free to call me directly at 877 462 3422, or visit our hard money loans page for more information.