Not everyone knows that when you build a home from scratch you must buy the piece of land it is being built on as well.
The great news about this is not only are you picking what your home will look like, but you can also do the same for its location too!
Here, we go over what you need to know when choosing a plot of land to build your dream home on, and how much it may cost you.
Finding land for sale
There are several ways to go about this.
You may be working with a developer that already has established parcels of land in a new community. This will take the guesswork out of the equation for you.
However, say you want something more specific. Most Real Estate search sites will have a “land” category for you to search and plug in your acreage and location preferences.
An even better way to browse available plots of land is to work with a Real Estate agent.
An experienced agent will know exactly how to use exclusive search software and industry connections to find what you are looking for.
Not only that, but they can also help guide you through the process of obtaining the land as well.
A few things you should keep in mind when shopping:
- Where you will be accessing the property from the street.
- Setbacks – meaning how far from a property line the structure must be situated.
- View ordinances, which can limit if you can add a second story to your home or not.
How much does land cost?
The U.S. Department of Agriculture puts out a Land Values Summary every year. According to 2020’s survey, the average cost for an acre of land was $3,100, but this can vary by location.
You also must consider land clearing and development costs. According to Home Advisor, this can range from $1,282 – $4,749 depending on how heavily wooded the land is.
Also, keep in mind that if you have to run lines for utilities the cost will go up even more.
Financing a land purchase
If you are already working with a contractor and have plans for your new build drawn up, you can possibly roll the cost of the land into your construction loan.
If not, you can secure a land loan then pay it off when you take out your construction loan.
There are a few different types of land loans:
- Raw land loan – These are for completely undeveloped plots of land.
- Unimproved land loan – These are for partially developed plots.
- Improved land loan – For land that has been developed and likely has access to utilities and roads already.
The easiest way to go about finding the right lender to provide this type of financing is to work with a contractor and/or a Real Estate agent to find exactly what you need. Not all lenders or banks will finance a land purchase.