Do you dream of owning your own hunting land? More and more Americans do — and you’re competing for limited (and ever-shrinking) amounts of land. In 2017, the number of people who went hunting within the last 12 months totaled 15.63 million. Hunting land loans may be the key to making your dreams come true.
While many want hunting land for their personal use, others purchase hunting land as an investment. These investors seek to make the land more attractive to hunters. For example, strategic cutting of timber may make the land more attractive to certain species of animals. And improved hunting opportunities will make the property more attractive to future buyers.
Whether you want to buy hunting land for your own use or as an investment, your first step is to figure out how you’re going to pay for it. But what’s the best way to finance your investment?
What are hunting land loans?
Hunting land loans are loans specifically designed to finance the purchase of raw, undeveloped land.
Not all banks offer hunting land loans. Far fewer lenders sell hunting loans than mortgage loans or auto loans, for example.
Lenders prefer for large-scale loans to be backed by collateral. Home mortgages, for example, use your house as collateral. If you default on a mortgage, the bank can take your house, reducing the risk for them. Loans backed by collateral tend to charge lower interest rates and more generous loan terms.
Hunting land, on the other hand, is often”raw land:” unimproved, uncivilized wilderness without modern conveniences like running water or sewer hookups. Because hunting land is undeveloped, it can be difficult for a bank to re-sell if a borrower defaults on the loan. As such, banks may not accept your hunting land as collateral for the loan.
So how can you collateralize a hunting land loan?
Secured hunting land loans
If your lender won’t accept your land as collateral, how can you acquire the lower interest rates and more competitive terms that secured loans provide? Simple: secure your loan with collateral other than the land itself.
If you own your home, you may be able to use your house as collateral for a land loan. This will greatly reduce the risk for the lender, thus drastically improving your odds of getting competitive terms and rates. Of course, this strategy brings risks of its own. If you default on your loan, you’ll end up losing your home.
Where should you look for lenders?
Your best bet is to approach regional and local lenders, as they will have a clearer understanding of the value of your land than a generic online lender. If you’ve been hunting in an area and like it, research around for a local credit union or regional bank who may be familiar with the area.
Look for lenders in the area that specialize in agricultural or farming loans. If they do, they may offer hunting land loans as well. Hunting land has much in common with farming land, because both require maintenance and conservation practices.
Borrowing from an agricultural lender comes with other benefits, too. Because farmers’ incomes vary considerably from season to season, agricultural lenders often don’t require monthly payments. Many will take quarterly or yearly payments instead.
You can also use a land broker to find land and help you with the purchase. A land broker will usually charge you a percentage of the land’s price. Land agents have knowledge of local zoning regulations and they will be helpful in solving issues that come up, such as gaining access to the land.
Which established lenders offer hunting land loans?
If you can’t find any local lenders or credit unions in your area that offer hunting land loans, you’re not out of options. There are a few online lenders who offer hunting land loans nation-wide. Consider the following:
Applying for a hunting land loan
For the most part, financing a hunting land loan has the same requirements as any loan. You’ll need to provide information about your salary, investments, and outstanding debt. The lender will also look at your credit score. Banks want to see a good-to-excellent credit score to approve any loan of this magnitude. As long as your credit score is above 700, you should be okay. If your credit is lower, consider finding a co-signer to help you get approved, or taking strides to improve your credit before re-applying.
With hunting land loans, lenders take on a greater risk than they would for, say, a loan for a house. Accordingly, you’ll have to bear a larger financial burden. For example, lenders often charge higher interest rates for raw land loans than they would for a personal or mortgage loan. They also often ask for larger-than-average down payments — potentially up to 50% of the loan. So if your hunting land costs $50,000, you might have to pay as much as $25,000 upfront. Handling the down payment can be the most difficult hurdle of buying hunting land.
Getting pre-approved for a loan will help the buying process go smoother. Not only will you know that you can get the loan, but pre-approval can also help you negotiate a better price. It’s important to note that according to federal law, most loans for over $250,000 require an appraisal that conforms to the Uniform Standards of Professional Appraisal Practice (USPAP).
To find the best loan, you must do your research. Compare terms and offerings from several different lenders before making your decision. Check the annual percentage rate (APR) of interest and term length offered by each. Ask about loan origin fees and other fees. Check to see if there is any penalty for prepayment. And be sure to read and compare reviews on lenders you are considering.
Ready to get started researching land loans? Compare lenders side by side to find the right loan for your needs!