Specialty Lending
Land loans finance the purchase of undeveloped or partially-developed real property — anything from a half-acre building lot in an established subdivision to hundreds of acres of raw timberland. They’re fundamentally different from home mortgages because the collateral (land) doesn’t produce income, is harder to value, and is slower to sell in a default scenario. Lenders compensate for that risk by requiring larger down payments (typically 20–50% depending on land type), higher credit scores, stronger reserves, and higher interest rates than residential mortgages. Not all land is equal: an improved lot with utilities, road access, and zoning is much easier to finance than raw acreage with no infrastructure. The clearer and more credible your intended use — building a primary residence, development, agricultural use, long-term hold — the better your financing terms will be.
Land is considered a higher-risk asset than an existing home, which means lenders typically require a larger down payment (20–50%) and stronger reserves.
The type of land matters enormously: improved lots (utilities, road access, zoning in place) are easier and cheaper to finance than raw, undeveloped acreage.
Rates on land loans typically run 1–3% higher than a comparable home mortgage, and terms are often shorter (5–15 years) rather than the 30-year standard.
A clear, credible intended use strengthens your application. Building a primary residence within 1–2 years typically gets the best terms; indefinite hold strategies are scrutinized more heavily.
Lot loans (improved land where you plan to build) often convert or roll into a construction loan when you’re ready to build — structuring that transition up front saves refinance cost later.
Land sitting in an HOA-governed subdivision with CC&Rs typically finances more easily than rural acreage outside any zoning authority.
Plans to break ground on a custom home within 12–18 months. Improved lot in an established subdivision with utilities and road access. Lot loan converts or rolls into a construction loan when plans are finalized.
Buys a lot in a desirable area before prices rise; plans to build 3–5 years out. Longer timelines typically require larger down payment (30–40%) and higher rates, but many lenders still support the strategy.
10+ acre parcel with an existing barn, well, or septic but no primary residence. Some lenders treat this as a land loan; others treat it as a rural/agricultural property loan with different terms.
Builder or developer acquiring a parcel for subdivision or multi-unit construction. Typically requires larger down payment, prior development experience, and a credible build plan with entitlements or a clear path to them.
Rural land for timber harvesting, hunting, farming, or recreational use. Specialty agricultural lenders (Farm Credit, local community banks) often offer better terms than mainstream residential lenders for these use cases.
Down payment $37,500, loan $112,500 at 8.5% for 15 years. Monthly payment about $1,108. Plans to build within 12–18 months; at that point, the lot loan rolls into a construction-to-permanent loan that combines the land balance and build cost.
5-acre parcel without utilities or direct road access. Down payment $32,000, loan $48,000 at 9.5% for 10 years. Monthly payment about $621. Buyer holds the land as a long-term investment; no immediate build plan.
Developer acquiring a 3-acre infill parcel for an 8-home subdivision. Down payment $105,000, loan $195,000 at 10% interest-only for 24 months. Monthly payment about $1,625 during entitlement and pre-sale phase; rolls into construction loans per home once plans are approved.
Example figures use illustrative rates and are for educational purposes only. Actual rates, terms, and costs depend on credit profile, market conditions, and property specifics.
If you already have approved plans and plan to break ground within months, go straight to a construction-to-permanent loan that rolls the land purchase and build cost into a single loan. Land loans make sense when you’re buying the lot well ahead of the build.
For large-acreage rural property with timber, farming, or agricultural use, Farm Credit and local agricultural lenders often offer better terms than mainstream residential land lenders — longer amortization, agricultural use accommodation, and sometimes lower rates.
If you have substantial home equity or cash, buying land outright or with a HELOC on your primary home may cost less than a dedicated land loan — especially for smaller parcels where the land loan’s origination costs are high relative to the balance.
Some land sellers offer direct financing with lower down payments and less paperwork than bank lending. Rates are often higher, terms are often shorter (3–7 years with balloon), but availability is real — particularly on slower-moving rural parcels.
Explore the programs land loans — raw land, lots & acreage financing are most often compared against, plus the Specialty Lending hub for the full lineup and today's mortgage rates for current pricing context.
Generally, yes. Land doesn’t produce income and isn’t as easy to sell as a house, so lenders view it as higher risk. That typically means a larger down payment and stronger financial profile is needed.
Yes, though lenders will want to understand your intended use. A hold strategy is possible, but terms tend to be more conservative the longer and less defined the plan is.
In some cases, yes. Planning ahead for a land-to-construction path can make the transition smoother — especially if you structure the initial purchase with that future step in mind.
Improved lots with utilities and road access: 20–30%. Raw acreage without improvements: 30–50%. The riskier the land (less developed, more remote, longer hold), the more cash the lender will want down.
An improved lot has utilities (water, sewer or septic capability, electric) and legal road access, and is typically inside a platted subdivision. Raw land lacks some or all of those — it’s the cheaper to buy but harder to finance end of the spectrum.
Most land loans run 5 to 20 years. Shorter than the 30-year standard for home mortgages because lenders want to reduce their long-term exposure to a non-income-producing asset.
USDA and VA both require a residential structure to secure the loan — they don’t finance vacant land alone. USDA does offer construction-to-permanent loans that include the lot purchase, if the borrower qualifies and the land is in a USDA-eligible rural area.
Most lenders cap residential land loans at 20–40 acres. Larger parcels typically require agricultural or commercial financing. A few specialty programs support larger acreage for recreational, timber, or agricultural use.
Not required for a pure land loan, but having a credible plan improves your terms. Lenders worry about borrowers who buy land with no intention to develop it — that profile is higher-risk than a buyer planning to build a primary residence within 1–2 years.
In most cases, yes — but the combined land + home financing is typically structured as a single loan rather than stacking a separate land loan with a manufactured home loan. Discuss the specific structure before buying.