A land loan is financing used specifically to purchase land without an existing home or building. These loans differ from traditional mortgages in that they typically require larger down payments (20-50%), have higher interest rates, and shorter loan terms (10-20 years). Lenders consider them riskier because there's no existing structure to use as collateral.

Down payment requirements vary based on land type:

• Raw land: 30-50% down payment
• Unimproved land: 20-30% down payment
• Improved land: 15-25% down payment
• Farm land: 10-25% down payment (with special USDA programs)

The more developed the land, the lower the down payment requirement typically is.

Land loan interest rates are typically 1-2% higher than traditional home mortgage rates. As of 2024, you can expect:

• Raw land: 7-12%
• Improved land: 6-10%
• Farm land: 5-9% (especially with USDA programs)

Your actual rate depends on your credit score, down payment size, loan term, and the type of land you're purchasing.

Most lenders require a minimum credit score of 680-720 for land loans. However:

• Excellent credit (750+): Best rates and terms
• Good credit (700-749): Competitive rates
• Fair credit (680-699): Higher rates, may need larger down payment
• Below 680: Very difficult to qualify; consider improving credit first

30-year land loans are rare but possible, especially for improved land that's ready to build on. More commonly, land loans have terms of:

• Raw land: 10-15 years
• Unimproved land: 10-20 years
• Improved land: 15-25 years (occasionally 30)

Shorter terms mean higher monthly payments but less total interest paid. Use our calculator to compare different loan terms.

Raw land: Completely undeveloped with no utilities, roads, or infrastructure. Most difficult and expensive to finance.

Unimproved land: Has basic road access but limited or no utilities. Moderate financing difficulty.

Improved land: Has utilities (water, electricity, sewer/septic), road access, and is ready to build on. Easiest to finance with best terms.

A standard land loan only covers the land purchase. If you plan to build immediately, consider these options instead:

• Construction loan: Covers land and construction costs
• Construction-to-permanent loan: Converts to a mortgage after building
• Land loan + construction loan: Two separate loans in sequence

If you're building later, a land loan now can be refinanced into a construction loan when you're ready.

Several sources offer land loans:

• Local banks: Often more flexible with land loans in their area
• Credit unions: May offer better rates to members
• Farm Credit System: Specializes in agricultural land
• Online lenders: Some specialize in land financing
• Seller financing: Property owner acts as lender

Shop multiple lenders as rates and terms can vary significantly.

You'll typically need:

• Proof of income (pay stubs, tax returns, W-2s)
• Bank statements and asset documentation
• Credit report authorization
• Land survey and legal description
• Purchase agreement
• Environmental assessment
• Zoning information
• Plans for land use
• Proof of access rights

Possibly, but with limitations:

• Interest deduction: Generally not deductible unless the land is for business/farming use
• If building: Interest may become deductible once you build and move into a primary residence
• Investment property: Interest may be deductible as investment expense
• Farm land: May be deductible as business expense

Consult a tax professional for your specific situation.

It's very difficult but not impossible. Options include:

• Improve your credit first: Pay down debts, fix errors, wait 6-12 months
• Larger down payment: 40-50% down may help compensate for poor credit
• Co-signer: Someone with good credit co-signs the loan
• Seller financing: Property owner may be more flexible than banks
• Portfolio lenders: Small local banks may consider other factors

The land loan process typically takes 30-60 days from application to closing:

• Pre-approval: 3-7 days
• Full application: 1-2 weeks
• Land survey and assessment: 2-4 weeks
• Underwriting: 1-2 weeks
• Closing: 1 week

The process can be longer for raw land or complex properties.

Beyond the land price and down payment, budget for:

• Closing costs: 2-5% of purchase price
• Land survey: $500-$2,000
• Environmental assessment: $500-$3,000
• Title insurance: $500-$2,000
• Appraisal: $300-$1,500
• Annual property taxes: Varies by location
• Land insurance: $300-$1,000 annually
• Ongoing maintenance: Brush clearing, road upkeep, etc.

Fixed rate: Interest rate stays the same for entire loan term. Best if:

• You plan to keep the land long-term
• Rates are currently low
• You want predictable payments

Variable rate: Interest rate can change. Consider if:

• You plan to sell or build within a few years
• Initial rate is significantly lower
• You can afford potential payment increases

Most land loan borrowers choose fixed rates for stability.

Usually yes, but check for prepayment penalties. Most modern land loans allow early payoff, which can save significant interest. Use our calculator's "extra payment" feature to see how additional monthly payments affect your loan term and total interest paid.

Even an extra $100-200 per month can shave years off your loan and save thousands in interest.

Our calculator provides accurate estimates based on the information you input. However, actual loan terms may vary based on:

• Your specific credit profile
• Lender fees and policies
• Current market interest rates
• Property-specific factors
• Local taxes and insurance costs

Use the calculator as a planning tool, but always get official quotes from multiple lenders before making final decisions.