Land Loans: What kind of fees should I expect from the lending process?

Land Loans: What kind of fees should I expect from the lending process?

One of the questions we get from almost every buyer we work with is about closing fees. Closing fees are typically paid by the buyer, unless stipulated in writing on the contract. In the last two years many buyers decided not to ask sellers to pay closing fees so that their offer was more competitive. Today we’ll cover different kinds of fees and when you might incur them.

Closing fees are fees that are paid in addition to your loan down payment. Your loan will not cover closing fees so you will need to make sure that you are bringing enough cash to the closing table. Outside of your property down payment you will need to account for the following fees:

Mandatory Fees

Origination Fee – This is the fee by the lender to collect loan paperwork and process your loan from underwriting through closing.

Tax Fees – These fees will be prorated. The seller will be responsible for the taxes on the property leading up to the date of the sale. The buyer will be responsible for the taxes on the date of sale through the remainder of the year.

Documentation Fees – Usually a minimal fee, this fee will cover the cost of documentation to record the sale. For instance, filling the deed with the appropriate county to record the sale.

Abstract or Title Fees – Usually performed by the closing attorney or title company, the title research is done to provide a clear title to the buyer. While this is an extra fee for the buyer, it is instrumental to have a clear title with no issues when purchasing. This can prevent a lot of significant headaches in the future when you are ready to use or sell the property yourself.

Closing Fees – These fees will be added by your attorney or title company for the work they perform to assist you in the close of the property.

Appraisal/Valuation Fees –  If you are using a lender to purchase the property, you will likely either need an appraisal or a valuation. Land appraisals must be completed by someone with a special certification. Since there are fewer appraisers certified to complete land appraisals, they often take longer than home appraisals. Additionally, there is also more information that is gathered on land than for home appraisals. Some lenders, like Land Line Lending, can do valuations on properties with certain qualifications. This shortens the closing process and has big cost savings compared to a full appraisal.

Voluntary Fees

Not all of these fees will be applicable to your sale. For instance, a survey is only required by lenders in certain situations. You also may not be required to get an appraisal, or complete a valuation, on a property if you are purchasing with cash as opposed to financing.

Survey Fees – To be certain of boundary lines and any encroachments, it is advisable to have a survey done. However, a survey is not required by lenders unless the property offered for sale is being divided out of a larger property. In this case, the survey will provide the boundaries to be created and the legal description to be used for the deed and title work.

Title Insurance – As mentioned earlier, title research is done to uncover any ownership issues on a property. Title insurance is advisable to make sure that if an issue were to arise, you have representation to fix the problem and/or pay for any damages or loss of property if there is no clear solution.

When you’re ready to move forward

If you are looking for financing, Land Line Lending is ready to assist you. Give us a call to learn more about the lending process, closing fees, and get pre-approved. Check out our pre-approval process to get started on your dream of land ownership.