Browse Forums Home Finance 1 Feb 05, 2015 7:09 pm Hello My husband and I are wanting to purchase a block of land, which will be released next month, but it is not expected to title until Oct/Nov. This is perfect for us (we think) as we will have saved the 10% deposit for the land by next month (not quite there yet), and we will be able to save around 10/15% of the build cost come land settlement (obviously more of it's delayed). i haven't confirmed this with the sales rep (as I felt silly asking, like I should know the answer), but I received an email from another developer regarding a different release that we were interested in and it mentioned bringing the pre-approval letter when putting a deposit on a block. My question is, is this a normal process? As the land we are interested in wont title for at least six months, making any pre-approval void. In addition, we wouldn't get the pre-approval in our current situation, which devastated me as I love the estate and know we won't have an issue getting the loan later in the year. I thought we would pay the deposit and sign a contract subject to finance, then just before settlement, we apply for the loan? Is this not right? Thanks for any assistance Re: Buying land 2Feb 05, 2015 7:18 pm I don't know the answer to your question. My situation however, I did have preapproval prior to putting the holding deposit down on the land. Then I had to sign the contract within about a week. The contract had a finance clause, so my broker applied to the bank for full unconditional approval within the finance clause period (21 days). Once I had the full approval, I paid the full 5% deposit on the land. My land will settle in June this year, but I paid the original deposit in August 2014. From my situation, it does sound like you need to have full approval soon, but not sure about preapproval. That being said, I didn't have to show anything to the land people, it was between my bank and broker. But your estate may have different rules. Maybe get yourself a broker? I was able to buy the land with a VERY small deposit, like you its only as of December I've saved enough to pay the deposit on the construction part of my loan. So you might be in with a chance? Re: Buying land 3Feb 05, 2015 7:37 pm Thanks for the reply. I feel silly for asking, but you mentioned the finance clause, and that being 21 days... Can you clarify, does that mean that you needed an unconditional approval for your loan for the land in that time? What I assumed was that we would pay our deposit, which I have confirmed is 10%, and sign the contract subject to finanve approval, and then we (essentially) wouldn't need to worry about any loans etc until we needed to settle. I thought this as I'd previously read somewhere that a bank will not provide unconditional approval on untitled land, but obviously this isn't the case as you were able to. So confused Re: Buying land 4Feb 06, 2015 1:50 am Our finance clause came with a 21 days period. So 21 days from the date of signing contract, we needed to go unconditional. And they started calling pretty much from day 10 on how we are going with the loan approval. We had some valuation hiccups and extended the finance period by another 14 days. But this extension depends on the land developer. Essentially you request the extension and they can then either give you the extension or void your contract and return the deposit. Our estate had quite a bit of demand, so that affects on how long extension they give you. Re: Buying land 5Feb 06, 2015 10:03 am Ok thanks. I'd just assumed the deposit was it and then you get the loan once the land can actually become yours. So, as risky as this sounds, could you pay the deposit, go unconditional and then arrange finance later to avoid paying off the loan for six months (potentially longer as I've read that not many blocks are titled when expected)? That way, we could arrange a loan to cover both the land and the house in one hit? There is not a doubt in my mind we would be approved for finance later in the year, but what would happen if we signed unconditionally and then couldn't arrange finance?
In our current situation, my husband's parents have given us approx 60% of the land deposit and we have saved the rest. By the end of the year we will have paid this deposit, plus saved around 15% of the build cost as well. Re: Buying land 6Feb 06, 2015 10:14 am Uh, not sure about the answer to your questions. My broker has taken care of most things for me, I too was not sure when I applied for land. Pretty much the steps taken were: 1. Got preapproval for a certain amount for both land and construction 2. Found land I wanted 3. Put down $1,000 deposit with land sales office on block settling April 2015 (purposely chose something a long time away). 4. Receive contract from estate, send it to my conveyancer and broker 5. Conveyancer told me there was nothing majorly negative in the contract, and we included a finance clause (originally 14 days, but I pushed for 21 days). 6. A week after paying the deposit, went down to the land office and signed the contract. 7. The land office sent copies of the signed contract to my conveyancer and broker. 8. The vendor didn't sign the contract... for like 2 weeks. 9. My conveyancer told them that as they didn't sign we were going to take an extension on the finance clause. 10. My bank gave me unconditional approval on the second last day of the clause. 11. Paid the balance of the 5% deposit on the day the finance clause expired (confirmed that I had paid to the sales office, conveyancer and broker) 12. Got a receipt for the deposit 13. Paid the conveyancer 14. Waiting for settlement 15. Settlement delayed until June 2015 (KEEP SAVING) I'm spending this inbetween time sorting out my construction, then I will roll the land and construction loans into one combined loan prior to settlement. Funnily enough my loan stuff has expired, and I have to reapply (I don't quite understand all this but the broker is dealing with it). I hope this helps. Definitely see a broker. I didn't want to originally, but one of the best things I did as I have an extremely tight budget and small deposit. I am doing 95% LVR. Re: Buying land 8Feb 06, 2015 10:29 am Oh, I read your post again. I think what you mean is when do you repay the loan? So, even though I have unconditional approval for the land loan and I am locked in to buy it once it settles (June). Between when I paid the 5% deposit and whenever the land settles, I don't pay anything for the loan. The loan only 'starts' on settlement date and then I have to start making loan repayments and pay the settlement fees (stamp duty, etc). So, I am currently out of pocket $7,600 on a piece of land worth $152,000.00. Oh and I paid $260.00 to the conveyancer for work so far. I don't have to pay anything else on the land until it settles, at that stage I will have to pay about $5,000.00 in settlement fees (stamp duty, establishment bank fees, .. some other stuff I can't remember). But between now and settlement I can save! So really I only had to have about $8,000 to get started. I paid $1,000 first, then the balance of $6,600.00 (5% total of the land cost). I have got the $5,000.00 in the bank for settlement to keep the bank happy. But I need another $8,000.00 to pay the 5% deposit for my construction piece, so far I've paid $2,000.00 deposit to my builder (as I found one I love and wanted to lock in the prices), I'm still working through the process, at the end of which I will pay the balance of $6,000.00. I didn't have this $8,000.00 until December, even though I bought land in June. So you can wait in that way? I did have the $5,000.00 though for settlement fees. Once I pay the balance of the builder deposit and settlement fees, I won't pay anymore money. The rest will be paid by the bank for both the land cost and the builder cost, and I will just make loan repayments from June this year, the repayments will increase as the build progresses (as each new stage of the build will increase the overall cost of the loan). Once I move in to the house (YAY) I will be repaying the full 100% of the total loan. Plus I will have to pay for extra things on the house like landscaping, blinds and furniture. So overall total deposit/costs to build my house out of my pocket will be roughly $21,000.00. Not impossible! That being said, I am a first home owner, so I get the $10,000 grant from the government and a reduction in stamp duty. So, my settlement costs are quite low. You might have a different experience. Hope that helps? Re: Buying land 9Feb 06, 2015 10:47 am Definitely helps, thanks. Maybe we do have a chance... We still have the issue now though that we wouldn't qualify for a loan as we don't have a steady savings history yet and the majority of our deposit was a gift. I'm hoping we could put our deposit down on the land but wait and arrange the finance at a later date once we know we will be approved. We are also first home buyers, so with that grant and our savings later in the year when we will apply for the loan, our total would be just under $60,000, for house and land equalling $385,000. Re: Buying land 10Feb 06, 2015 10:56 am It sounds like your in with a chance, but yes banks are particular about genuine savings. It's funny, I didn't think I had a chance of getting approval, I was just window shopping displays. I never meant to build a house, or even buy a home for another 2 years. Definitely try to find a broker, you might be able to just do some basic figures with them over the phone, they might be able to find a bank or lender who is willing to work with you. Good luck! Re: Buying land 12Feb 06, 2015 2:23 pm You can get unconditional loan approval, but you don't start paying for your loan till the first draw, which happens on land settlement. We paid deposit for land, so that's now held for us, found settlement time frame. Went to a builder to work on house plan, told them settlement date, hence cannot commence build work before that. Land contract also had clauses for soil test. Paid builders the first non refundable deposit for soil test and drawing contracts etc. Got soil test done, signed land contract and build contract, applied for loan. Buying land 13Feb 06, 2015 9:21 pm TeeVeeTee Definitely helps, thanks. Maybe we do have a chance... We still have the issue now though that we wouldn't qualify for a loan as we don't have a steady savings history yet and the majority of our deposit was a gift. I'm hoping we could put our deposit down on the land but wait and arrange the finance at a later date once we know we will be approved. We are also first home buyers, so with that grant and our savings later in the year when we will apply for the loan, our total would be just under $60,000, for house and land equalling $385,000. We didn't have genuine savings as we were already homeowners and had to sell our previous house to be able to build. My parents gifted us money for 10% of the land value. Most banks want to see that money in your account for 3 months! Suncorp didn't need to see a savings history, they just wanted to see proof of funds in the bank, regardless of how long it was there for. Maybe try them? Modified Cisco 37 QLD EDIT: our land was already registered, all civil works done and ready to build on Re: Buying land 14Feb 06, 2015 9:40 pm Are you sure you guys (or gals) received unconditional approval for untitled land? Lenders will normally require suitable security (the land) and a suitable valuation of the security before they give unconditional approvals. As nothing has titled, there is technically no security? Therefore they only give conditional (pre-approval) subject to these conditions. This is basically the same as with off the plan purchases. In regards to the OP, you are correct, no use doing a pre-approval if you don't qualify at the current time and as you mentioned it's only valid for 3 months (though some lenders do allow 6 months). The other thing about subject to finance is that due to the long time until settlement, vendors normally won't allow the STF clause for such a long time either (i.e. just before settlement). As for the deposit and the developer asking for a pre-approval, well that is just hogwash. It just means that you will sign the contract unconditionally which any developer would normally love to accept. There really should be nothing stopping you from doing that, then waiting until closer to settlement (which would normally be 2 weeks after land is titled and registered, at least that's how it is in Victoria), and then applying for the loan. You do however run the risk if you cannot gain approval then of losing your deposit (and maybe other damages). Cheers Tom Re: Buying land 15Feb 06, 2015 9:43 pm LauraKG TeeVeeTee Definitely helps, thanks. Maybe we do have a chance... We still have the issue now though that we wouldn't qualify for a loan as we don't have a steady savings history yet and the majority of our deposit was a gift. I'm hoping we could put our deposit down on the land but wait and arrange the finance at a later date once we know we will be approved. We are also first home buyers, so with that grant and our savings later in the year when we will apply for the loan, our total would be just under $60,000, for house and land equalling $385,000. We didn't have genuine savings as we were already homeowners and had to sell our previous house to be able to build. My parents gifted us money for 10% of the land value. Most banks want to see that money in your account for 3 months! Suncorp didn't need to see a savings history, they just wanted to see proof of funds in the bank, regardless of how long it was there for. Maybe try them? Modified Cisco 37 QLD If you have more than 15% deposit, then basically any lender will accept it no matter where the funds come from (i.e. gift), and no genuine savings are needed. Some will even accept 10% as a minimum without genuine savings. Cheers Tom Re: Buying land 16Feb 06, 2015 9:57 pm That's what I thought too - that savings had to be in your account for at least three months. I'm feeling more and more uneducated in the whole real estate buying and building process lol. One thing I did manage to do was speak to the land sales guy. He said the way they operate is they take the initial holding deposit, then allow buyers up to 14 days to arrange the balance of the 10%. They don't expect and don't need to see any documents regarding finance etc as the settlement is so far away. I should have also asked this (but didn't think of it), but I took that to mean the contract will allow a subject to finance clause. But it allows us to pay our 10%, save even more and then arrange the one loan closer to the settlement date, which will suit our current circumstances perfectly. I still can't ge too excited though as he mentioned they have 'a significant number' of people interested in this release (which I've also heard from people already living in the estate saying there's at least 180 people on the list with less than 40 blocks available) so there's a good chance we still may not get our dream block, especially since only three will fit the house we would like to build. They're not sure how they will be sold, whether a ballot, first in best dressed etc, hopefully we do get a chance. Fingers crossed!!!! Thanks for your input everyone, I really appreciate the responses and clarification on everything! Tom, I've also just seen your replies, thanks, they've helped a great deal too. The sales guy did also say the same as you regarding loans/pre approvals etc, so whether it be allowed in some cases or not, it works in our favour here, which is fantastic. It was the email that I got regarding the pre-approval letter for the land we were previously interested in as they definitely asked for it. I've just reread the email again to double check and copied the appropriate section 'The sales team will ask you to provide them with a pre-approval letter from your name or preferred lender", which was a surprise to me anyway as from what I've been reading, a pre-approval practically means nothing. Either way, we aren't planning to buy there anymore, so no big deal. Thanks again everyone, I appreciate the time you've taken to respond Re: Buying land 17Feb 07, 2015 3:09 pm Hi, You've been given all the right answers here! The preapproval requirement is so the developer can prequalify your ability to buy the land, especially where the land is going quickly. It's simply for them to avoid wasting their time. You can get a finance clause written in - but I doubt anyone would agree to this being just prior to settlement - usually only 10-21 days, and even this is depending on the state & the developer. You can get approvals for off the plan purchase that last up to 18m, otherwise you can get an approval that expires & providing nothing changes for the worse it's easy to renew. You can also get an approval for your current situation & keep saving & rejig it down the track to save on mortgage insurance. Keep up the good work! Bec Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Buying land 18Feb 08, 2015 12:55 am TeeVeeTee One thing I did manage to do was speak to the land sales guy. He said the way they operate is they take the initial holding deposit, then allow buyers up to 14 days to arrange the balance of the 10%. They don't expect and don't need to see any documents regarding finance etc as the settlement is so far away. I should have also asked this (but didn't think of it), but I took that to mean the contract will allow a subject to finance clause. But it allows us to pay our 10%, save even more and then arrange the one loan closer to the settlement date, which will suit our current circumstances perfectly. It won't hurt to ask but its highly unlikely that the developer will allow a subject to finance clause just before settlement. Otherwise they could find a lot of buyers changing their minds and opting out which would then leave them in a big hole. Cheers Tom Re: Buying land 19Nov 04, 2015 4:41 pm Hi, I am buying my first Land in Australia. I have paid $1000 deposit to secure a land which titles Nov 2016. The land sales consultant recommended to go for an unconditional contract since the land titling is 1 year away. The justification he gave was that if I go for a subject to finance approval - I have to get a pre approval letter and my pre approval will expire in 3 months and that the finance clause ends in 30 days so the contract becomes unconditional after that anyway. So gaining pre approval will only give me "Peace of mind" that I can get loan. He also added that if I go for a subject to finance contract to go for an informal approval from my mortgage broker. Is this true? Is he trying to trick me? Re: Buying land 20Nov 04, 2015 4:46 pm Hi Seban, Absolutely if you can get an unconditional approval that's valid for 12m or longer that's your safest bet. There are lenders who offer this - ask your broker what they recommend. You can't get unconditional approval for the build without the contract so there's still a risk but a lot safer if the land is fully approved. Good luck with the build Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Yeah I don't know why I came to a forum. Place is full of wierdos/pedos thought internet may help but I suppose I'll try my luck with someone in person. Cheers. I tried… 0 6668 Need advice on the backyard plan above. Should I excavate and cut all of the dirt to level with the house slab or semi-excavate as per photo above? Both left and right… 0 25157 13 6776 |