Getting a Land Loan in Idaho: A Comprehensive Guide

Taking out an Idaho land loan isn't as simple as walking into a national bank and requesting a mortgage. Although mortgages and land loans work similarly, the latter hold borrowers to higher standards. For instance, most regional banks and credit unions that offer Idaho land loans only accept clients with a credit score above 700 and a debt-to-income ratio of at most 30%. Prospective borrowers also need a clear plan for developing their future land. If a bank doesn't feel you have the resources or credit history to transform your land, they probably won't feel comfortable issuing a land loan.

What are the eligibility requirements to take out a land loan in Idaho?

The specific eligibility requirement for land loans depends on each Idaho bank's particular terms and conditions. Although these stipulations can vary between organizations, borrowers should expect to meet higher standards.

How much money can I borrow with a land loan in Idaho?

There's no statewide cap on how much money you can borrow for your Idaho land loan, so you need to consult agents at different institutions. However, one feature all land loans share is a high minimum down payment. You will probably need to put down at least 20% of your loan's value if you're approved to take out an Idaho land loan.

What is the interest rate for a land loan in Idaho?

Again, the interest rates for Idaho land loans largely depend on which financial institution you're working with. Also, these rates fluctuate depending on the Federal Reserve's current national policy. That being said, interest rates on land loans are typically higher than for Idaho mortgages or auto loans. Land loans are considered a "high-risk" investment for banks, so they tend to charge more in interest to minimize the chance of losing their money to a default. Currently, rates may be around the 7% range or higher with an Idaho land loan.

What are the repayment terms for a land loan in Idaho?

The repayment terms for your Idaho land loan depend on a few factors, including which bank you're using and the quality of your land. For instance, "raw" land tends to have the shortest repayment window because it's the riskiest collateral from the bank's perspective. By contrast, "developed land" with access to paved roads, electricity, and a septic system is inherently more valuable; therefore, banks may charge lower amounts for these land plots with a more flexible repayment schedule.

Generally, it's easier to negotiate payment terms with developed land rather than raw or underdeveloped land lots. There are, however, limits to how long a bank will extend your payment calendar. Financial institutions usually want people to repay their Idaho land loan as quickly as possible to minimize the risk of default. Borrowers should expect to repay their loan within 2 - 5 years after taking it out.

How long is the Idaho land loan approval process?

Each Idaho bank or credit union takes a different length of time to approve land loans. In most cases, you should hear back about your Idaho land loan status in a few days or a week. If it takes longer than one week to approve an Idaho land loan, chances are you need to submit more paperwork or address your credit concerns.

Sometimes working through an Idaho land brokerage firm can speed up the loan approval process. Professional land brokers know the intricacies of submitting loan applications and can help clients sort out their paperwork beforehand. A land broker can also inform loan buyers of their property's specific zoning requirements, legal policies, and insurance stipulations. While it's not guaranteed a land brokerage firm will shorten the time to get an Idaho land loan, it may be beneficial for people who don't have experience in this market.

How long does it take to receive funding for a land loan in Idaho?

Once a bank approves an Idaho land loan, borrowers technically have all the money they need to secure their land. However, the land lots in question will legally transfer to the borrower once the loan is paid off. People often have to repay land loans within 2 - 5 years after taking them out. Until a borrower completes their loan term, the land they're interested in is used as collateral for the bank's terms.

What are the fees associated with a land loan in Idaho?

All land loans carry high interest fees compared with mortgages. People who take out an Idaho land loan could have to pay 7% or more in interest for their monthly installments. In addition to interest rates, there may be insurance, commission, or county-specific fees people need to pay for their Idaho land loan. You should also consider extra costs for professional land surveys and soil tests when evaluating different Idaho plots of land.

The best way to figure out the fee structure for an Idaho land loan is to speak with agents at the issuing financial institution. Borrowers can also research specific laws and policies in their Idaho county's courthouse. Professional Idaho land brokers can also inform clients of the fees they should expect to pay when taking out a land loan.

What are the benefits of getting a land loan in Idaho?

Idaho land is valuable for people involved in the agriculture and livestock sectors. Many Idaho counties, such as Cassia, Gooding, and Twin Falls, produce tons of cash crops yearly, including the state's world-famous potatoes. Other valuable products Idaho exports include hay, cheese, sugar beets, onions, and cattle. Anyone with an interest in cultivation or livestock will find plenty of fertile land parcels to set up a ranch or farm.

But investors don't need to be in the agriculture industry to get value out of their Idaho land. For instance, property development in Idaho is picking up steam as more people move to the Gem State. Families, retirees, and young professionals are increasingly drawn to Idaho's natural splendor and countless outdoor activities. Anyone involved in the tourism, rental, or real estate markets may find unique opportunities with their Idaho land.

Lastly, people most interested in a secluded lifestyle with easy access to the great outdoors will likely enjoy living on an Idaho land lot. Although Idaho's population is growing, it's still easy to find plenty of large land tracts for ultimate privacy and pristine natural scenery. For those who dream of a life filled with activities like hunting, kayaking, fishing, or hiking, Idaho land may be a dream come true.

What are the risks of buying land in Idaho?

A potential downside of buying land in Idaho is that borrowers need to spend more on development. Although there's some urbanization in the Boise area, Idaho is one of the least developed and sparsely populated states in the USA. Even if it's possible to develop on your raw land plots, you'll likely have to spend a significant sum on building your property. Each Idaho county also has unique construction rules and zoning requirements landowners need to carefully consider before developing their plan and opening a land loan.

Also, because so few people are in Idaho, residents don't have easy access to emergency services or facilities such as hospitals. Anyone interested in living in Idaho must carefully consider an emergency plan and double-check their Internet connection and telecommunications infrastructure.

It's also essential for landowners to consider Idaho's unique weather hazards. Flooding and wildfires aren't uncommon in this state, and Idaho's temps are bitterly cold during the winter months. If you're serious about owning property in Idaho, be sure to review the average weather patterns in this state and discover necessary insurance policies and safety measures.

What happens if I default on my land loan in Idaho?

Defaulting on an Idaho land loan will harm your credit score. Therefore, you will have a more challenging time accessing financial institutions with a default on your record. Since the impact of failing to pay a loan is severe, please carefully evaluate your finances before entering into a loan agreement. If necessary, speak with a professional land broker or a personal finance expert to determine if you have the funds to reliably pay off your Idaho land loan.

What are some other options for financing the purchase of land in Idaho?

Another way to get a land loan in Idaho is to work with a bank in the Farm Credit System (FCS). The US Government created the FCS shortly before the Great Depression to help farmers access necessary funds. Today, the FCS is an independent network of banks and credit unions that continues to support the nation's agricultural sector. People involved in crop cultivation or rearing livestock in Idaho can apply for a Farm Credit loan through an FCS bank for multiple purposes, including buying land, scaling their manufacturing operations, or updating their equipment. According to the FCS's website, over 4,000 Idaho farmers have taken out over $5 billion in Farm Credit loans in 2021.

If investors are still struggling to find a way to finance their Idaho land purchase, they may want to speak with an Idaho land broker. Professional land brokerage firms have the expertise and tools to find suitable land lots for each client's budget and goals. These firms can also help people finance their Idaho land purchase by negotiating flexible repayment terms.