Land and lot loans
Buying land? Here's what a lender actually looks at.
Raw land, a buildable lot, or acreage you just want to own. How land loans differ from home loans, what makes a parcel financeable, and how to plan the path to building.
Written by the East Coast Mortgage team
Three kinds of land loans
Lenders don't treat all land the same. Where your parcel falls decides who will lend on it and how:
- Raw land: no utilities, sometimes no road. The hardest to finance, because it's the hardest for a lender to resell.
- Improved or buildable lot: road access and utilities at or near the property line. Easier to finance, and often the step before a build.
- Land plus construction: if you're building soon, a construction-to-permanent loan can cover the lot and the build in one closing, then convert to a regular mortgage when the home is done.
Why land loans work differently
Land loans usually ask for a larger down payment and come with shorter terms than a home loan. The reason is simple: vacant land is harder for a lender to sell if a loan goes bad, so lenders offset the risk. Many land loans are held by the lender that makes them rather than sold, which is why guidelines vary so much from one lender to the next.
What a lender checks on a parcel
Expect questions about all of these, and have answers ready:
- Access: deeded road frontage or a recorded easement. Landlocked land is very hard to finance.
- Utilities: power, and water from a public line or a well.
- Septic: without public sewer, a soil evaluation (perc test) shows whether a septic system can be permitted. In Virginia and West Virginia that runs through the local health department.
- Survey and boundaries: a current survey avoids surprises about what you're buying.
- Zoning and permitted use: what the county allows on the parcel, including any minimum lot size for a home.
- Flood zone: FEMA's flood maps show whether any part of the land sits in a special flood hazard area.
- Your plan: building soon, holding it, or using it for recreation. Each one points to different lenders.
Who lends on land
Land financing comes from a narrower set of lenders than home loans: banks and credit unions that keep loans on their own books, specialty wholesale lenders, and, for rural and agricultural property, the cooperative lenders of the Farm Credit System. As a broker, we compare the ones that fit your parcel instead of forcing it into one bank's box.
If you plan to build, talk to us before you buy the land. Some construction lenders can count equity in a lot you already own toward the project, and choosing the right land loan now can make the construction loan easier later.
Common questions
Can I get a land loan if I never plan to build?
Yes. Recreational land, hunting property, and acreage you simply want to own are common reasons for a land loan. Tell your loan officer the plan, since it changes which lenders fit.
Is a lot loan the same as a land loan?
A lot loan is a land loan for a buildable parcel, usually with road access and utilities nearby. Raw land without those is a separate, harder category.
Can I finance the land and the house together?
Yes, with a construction-to-permanent loan, if you're ready to build. It covers the lot and the build in one closing and converts to a regular mortgage when the home is finished.
What should I do before making an offer on land?
Confirm access, utilities, septic feasibility, zoning, and flood zone, and make the contract contingent on what you can't confirm yet. Then talk to a loan officer before you sign.
Keep going
Financing for Land, Not Just Homes
Raw land, a buildable lot, or acreage you just want to hunt, camp, or ride on. There's a loan for that.
Construction LoanFinancing to Build, Not Just Buy
Building a home from the ground up needs a different kind of loan than buying one that already exists.
Manufactured Home LoanFinancing Built for Manufactured Housing
Manufactured and mobile homes have their own financing path, and it's more available than most people think.
Sources
- CFPB: Exploring your loan choices
- FEMA: Flood Map Service Center
- Farm Credit Administration: Farm Credit Administration
- CFPB: What is a Loan Estimate?
General information, not advice for your specific situation. Program rules come from the agencies above and from each lender, and they change. A licensed loan officer confirms what applies to you.
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