Financing a Lot/Land

[sammythesm]

My wife and I decided we wanted to (just for fun) start looking around for a lot to build our "dream house" on. Within a week, we found the perfect 2.5 acre lot in an up-and-coming part of town for what we feel like is a very good price: 75k. We'd want to build a home on it in 5-10 years, but take advantage of the low market to make an offer on the land now.

We recently finished funding our emergency fund: $17,000. We have only 10k equity in our first/only mortgage. We have about 35k in 401k, and 40k in stock (ESPP, options, and RSUs). Our combined income will be 130k this year. We both have credit ratings in the mid-high 700's.

We feel like we could pay for this lot in 2-3 years (we're currently living off of my income and saving all of hers), but don't have a down payment available right now (w/o blowing away the emergency fund, which we don't want to do).

Any ideas on how we could finance? We have seen that most lot loans from banks want 20-35% down, and a commitment to build within 5 years. We don't like either of those conditions.

It's frustrating that we could very easily get a loan for a 50k car if we wanted, but getting a loan for a real asset is much harder...

[disneysteve]

We feel like we could pay for this lot in 2-3 years

Save up for 2-3 years and then buy a lot for cash.

[Ima saver]

If it is your "ideal lot" you could buy it with about $15,000 down. With your income, you could build your emergency fund back up quickly. I would use your emergency fund and then scrimp and save til you put the $15,000 back into it.

[sandrark]

Owner financing is your only option. With the current meltdown, I've been told bare land deals are now requiring a 50% down payment with bank financing.

Other than that, sock away the money for 3 years, and then wave cold, hard cash in their face.

Sandi

[devatha]

rule number one is don't get into debt unnecessarily, that too from money sucking vampires/parasites(banks) , unless you know everything about loans, terms and conditions in the fine print. You need 75k. Then as per my advice, 17k from emergency fund(it is better to leave the emergency than paying high interest to banks) , 40k from stocks(SP500 increased by 40% as of now, assuming you are in america) I don't know about 401k. So, I can not comment on that and the rest from your spouse sal(18k- les than 2months sal i think). But, first know whether the price you are paying for the lot/land is not high. I am not from america.

[devatha]

sorry, nearly 4months sal. So, if have any existing savings, you can take from there. One more thing, buy 2/1.5 acre rather than 2.5acre. Just adjust. otherwise, Have the ability to delay the gratification of buying the land for your dream house till you get 75k. Learn abt financial fundamentals about mutual funds such as when to buy , which fund to buy and when to sell to make the earned money earn more. don't know whether the stock money you have is the funds / stocks you choose on your own/others' advice.

[devatha]

if you don't want to use emergency fund, then disneysteve advice is correct.
Buy only when you have all the cash.

[devatha]

disneysteve's advice is the best advice. Wait for 8months(save your spouse sal of these 8 months add the stock portion. Sell stock if they are increased by more than 25% in the past year.). I don't think housing market will improve in the next 12months in america.