You’re debt-free. No car payments, student loans or credit card balances. You have a fully funded emergency fund that will cover at least 3–6 months of expenses. You know that your monthly payments between the land and house loans will be no more than 25% of your monthly take-home income. mortgage. That means you’ll want to get a 15-year fixed-rate loan, and you should save up a strong down payment of at least 5–10%. If you can save up a bigger down payment, like 20%, that would be even better because you’d avoid having to pay private mortgage insurance (PMI) . On top of all that, you need to make sure you’ve checked all of these boxes: Completely debt-free with a paid-for home. Already investing 15% of your pretax income into retirement accounts. Saving for your kids to go to college debt-free (if you have kids). Going into debt for an investment will only bring you stress. You’ll have much more peace—and, ultimately, make more money—if you save up to buy land with cash. You also shouldn’t buy land as an investment unless you’re . . . If You’re Buying Property as an Investment If your living situation is squared away and you’re buying land as an investment or for some other reason, taking out a loan is a bad idea. Don’t invest in land (or real estate, for that matter) unless you can pay for it in cash. If You’re Buying Property to Build a Home If you’re buying land so you can use it to build a home for your family to live in, the best plan is to pay cash for everything—the land and your future home. If that’s not realistic for you, taking out a loan is okay. First, you’ll have to take out separate loans for the land and the homebuilding. Getting a land loan is a very different process than getting a mortgage, and the rules are different too. That’s why you’ll want to work with a quality real estate agent, because they’ll be able to help you figure out which type of land loan you need and how much of a down payment is required. When it comes to the homebuilding loan, you’ll want to treat it like a If you haven’t hit all three of those goals yet, that’s where your focus needs to be for now.
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