How To Buy Land In Michigan: A Complete Guide

If you have thought about building your own custom house, the first step in the process will involve choosing where you want to build. Picking a piece of property is incredibly important. It will affect not only your day-to-day life but the overall cost of your construction project. There are several aspects to purchasing land in Michigan. This includes setting your budget (taking into account what you plan to spend on the construction of your new house) plus figuring out financing. When you are choosing a plot of land, it is a good idea to work with your home builder and other trusted experts to determine if the property is not only suitable for construction but will work for the type of house that you want to build. Based in Grandville, Snowden Builders is a team of Grand Rapids custom home builders that constructs custom homes throughout Western Michigan. We pride ourselves on a customer-first approach to building, together with a commitment to the highest quality craftsmanship around.  In addition to building beautiful custom homes, we can also help you find properties through our real estate services. Reach out today to talk to a Michigan custom home builder about buying land and building a custom house on your property.

Step One: Budget and Finance

Before embarking on your quest for property, you should first understand exactly how much you have to spend – and if you need a loan, how you will finance the purchase. When purchasing a plot of land to build a home, there are things to consider that you don’t have to account for when buying an existing home. This includes standard expenses like closing costs and property taxes as well as permitting and the costs of connecting to utilities. Generally, lenders consider a purchase of land to be a riskier investment than buying a house. This makes land loans harder to obtain and more expensive (higher interest rates). If you can pay out of pocket for your property – which may be possible in many areas of Western Michigan – that might be your best option in terms of financing. Of course, it isn’t always possible to pay for a piece of property outright. If you need to finance the purchase, then you will look for a land loan – which is different from a mortgage. Your ability to get a loan and the cost of the loan will be partially based on the type of land that you are purchasing (i.e., how risky the loan will be for the lender):

1. Raw land is completely untouched. It won’t have roads, electricity, water, sewage, or other utilities like gas and electricity. A land loan for raw land will typically mean a bigger down payment and higher interest rates. 
2. Unimproved land is essentially a step above raw land. It might have some basic features like access to local roads, but not utility access. These loans will also require a larger down payment and higher interest rates (also typically less so than a loan for raw land.
3. Improved land is ready for building, with all of the basics – like road access and utilities – available. A loan for improved land will require a much smaller down payment and come with lower interest rates.

If you do need to finance your purchase, it is a good idea to explore programs that might help you get a better deal. For example, if you currently own a house, you might consider taking out a home equity loan. In rural areas, you can potentially get a loan through the United States Department of Agriculture (USDA). If these aren’t options, you can talk to your bank or credit union about a land loan.

Step Two: Work with Experts to Find Land

Once you have determined your budget and figured out financing, you should consider talking to a realtor or custom home builder to help you in your search. Most people don’t necessarily have the necessary knowledge to pick out a piece of land that would be suitable for construction. They might not also be familiar with some of the limitations that may be present. A real estate agent or builder can help you find a property that is suitable for building. They can also give you a better sense of how much it will cost to build a custom house on that parcel of land.  At Snowden Builders, we offer the unique advantage of having both builders and real estate brokers on our team. In fact, owner Bob Snowden is both a licensed builder and a licensed realtor. We can offer you unique insight that will help you make a more informed choice when it comes to building. For example, you might be determined to buy a house on or near the water – a dream for many Michiganders. However, there are certain things that need to be considered when building close to the water – including environmental restrictions, flood resistance, drainage, and increased construction costs. We can help you find a great waterfront property and explain how proximity to the water will impact your house plans.

Step Three: Start Your Search

Once you have a budget and a professional to help you with the search, you can begin to look for properties. Before you get started, you should have some ideas about what you want and do not want. This could include:

• The size of your yard or lot
• Whether or not you want to have nearby neighbors 
• Distance to work, school, stores, and other amenities
• The availability of utilities
• Proximity to water
• Any unique property features, like a good area to eventually put in a pool or the ability to fence your yard for your pets.

Most real estate websites have listings for land. Our realtors can help you sort through property listings based on your specific criteria, such as acreage and the price per acre. We can also help you understand what it would take to build on a certain piece of property. When you have narrowed down your search to one or two properties, you might choose to work with a land planner. This professional will analyze different features on the property – such as the water table, soil type, and slope – to determine if it will be possible to build your desired home. Their expertise can be invaluable, particularly as it can prevent unpleasant surprises down the road.

Step Four: Research the Property

Once you have found your perfect plot of land, you still have work to do. Either you or a professional that you are working with should examine various factors such as:

• Zoning and land use restrictions, such as setbacks that dictate how close to the property line you can build;
• Road access;
• The availability of utilities, including internet and cell phone access;
• Any construction plans nearby, such as the proposed construction of a medical center that will bring a lot of taxes;
• Property taxes;
• Whether the property is on a septic system or can tie into a community sewage system;
• Any deed restrictions if the home will be built in a homeowner’s association (HOA) community; 
• Flood zones; and
• The suitability of the soil for building.

You may already have the answer to some of these questions if you are working with a land planner and a real estate agent. You may also work with other professionals, such as a surveyor or a real estate lawyer, who can provide you with additional information.  Buying a piece of property is a huge financial commitment. Before you make an offer, you should fully understand all of the details about the property so that you know whether or not you will be able to build on it. Snowden Builders can help you with this process, giving you peace of mind in knowing that you are making a smart decision.

Step Five: Make an Offer

Once you have decided that you want to buy a piece of land, done your homework, and figured out financing, you can make an offer on it. Your real estate agent can help you put together a competitive offer for the property.  When purchasing any piece of real estate, the purchase offer will usually contain contingencies. These are clauses in a contract that effectively state that certain things must happen for the deal to occur. For example, if you want to buy a house, you might include a contingency that makes the purchase of the new house dependent on the sale of your current house. This way, you won’t end up buying a new house while you’re still paying a mortgage on your existing house. The purchase of land isn’t much different. Contingencies are an important way to protect yourself in a real estate deal. You can include contingencies such as the ability to obtain financing and the suitability of the land for building.

Step Six: Obtain Financing

If you aren’t paying cash for a piece of land, then you will need to take out a land loan. You might be able to get a joint land and construction loan – known as a construction-to-permanent loan- to combine financing for the land and the building into a single loan. There are other potential types of loans that will be based on your specific situation. If you aren’t ready to build just yet but found a perfect property, a straight land loan may be your best bet. You should work with your lender to evaluate your options and determine what type of loan is best for your situation. You will then go through the application process and hopefully be approved for a loan.

Step Seven: Close on the Purchase

Whenever you purchase real estate, there is a final legal step that must happen before the title can be transferred. A closing is essentially a meeting where the owners, buyers, and other interested parties sign a lot of paperwork to transfer the title and finalize payments. Once all of the documents are signed, you will officially own your property.

We’ll Help You Build A Home On Your Lot

For many people, building a custom home is a dream come true. But before you can start planning your new house, you will need somewhere to build it. With expertise in both construction and real estate, Snowden Builders can walk you through the process of purchasing land for building a custom house. Once you acquire your land, we’ll help you build an exceptional home on it.  For more than 25 years, Snowden Builders has helped residents in Western Michigan design and build high-quality homes made to last a lifetime. For homeowners, we offer both real estate services as well as premier-quality construction of custom homes. We will work with you to not only find land but to build a fantastic new house on that property. If you are thinking about buying land to build a new home in Michigan, we can help. To learn more or to schedule a consultation with a member of our team, give us a call at 616-532-1800 or fill out our online contact form.