Read About the Best Practices For Getting Land Loans 

If you own land, at some point, you may want to get a land loan to build a business or home on.

If you don’t already have a block of land, you may be interested in buying some land and building your dream home or business. Before you decide to take out a loan, learn the different types of loans available to you. The kind of loan you use will depend on why you’re buying the land and where the lot is.

If you’re going to build a home, you must consider if utilities will be a problem. You will need basic services such as sewer, cable television or internet, water, and electricity. If these features are ready for installation, the better for you. You don’t have to spend the money to hook it up. Just the same, having access to schools or the roads is essential to most home buyers.

It’s also a good idea to verify property values in the vicinity or district and to inquire about any plans in the coming months. A new business nearby, new roads, or road improvements can increase property price tags however, a sewage treatment plant will do just the opposite.

How To Get A Land Loan

Getting a land loan is easier if you apply at a community bank or credit union in the same area as the land you’re hoping to buy. Still, depending on what you are going to use the land for, you may be able to take advantage of more than one loan option.

There are a few different kinds of loans and each one has its own set of qualifications.

For starters, borrowers need to have excellent credit. They will likewise need to specify how they will use the land. Again, the qualifications for this kind of loan will vary. Borrowers must additionally highlight phases of the property that need zoning, surveying, or have any use restrictions, or limited access to services. These factors will give bankers a general idea of the risk associated with the loan.

Once a lender weighs these determinants, they can fix the rates and assign the responsibilities of the land loan. Interest rates for land loans are higher than mortgage interest rates because they hold a higher risk factor.

However, a borrower can apply for a lower rate if they have a sufficient credit score and a low debt-to-income ratio. After they determine the loan’s interest rates, approve the borrower, and agree to the lender’s terms, the borrower can then make the down payment and begin making the payments when due.

Finding Financing

Given the above, search for ways to finance your land proceeding with satisfactory terms. Try these options:

Seller Financing

This can be a great option if you’re looking for quick results and favorable terms. It works out for everyone, especially if the owner is anxious to sell the land. Since this is an arrangement between two private adults, everything is upfront and easily transferable. It is important to have the down payment available and the contract reviewed by a real estate or land attorney before signing paperwork to avoid deceptions and rude awakenings later.

Local Banks and Credit Unions

Local banks and credit unions are more ready to lend borrowers money on land loans than other financial institutions. They may offer more generous terms due to their familiarity with the plot. Still, a potential borrower needs to submit financial information to prove creditworthiness, a loan package complete with land specifications, and a proposal for the land.


If the land is rural and agricultural, the potential buyer could obtain federal aid. The United States Department of Agriculture (USDA) awards a variety of subsidized loans with minimum requirements and worthwhile terms.

Home Equity Loan

With existing property and a low debt ratio, a borrower may qualify for a home equity loan. This type of loan taps into the equity of the existing property, giving the landowner more favorable terms than a regular construction or land loan.