Buying land can feel like a dream until you hit the financing wall. Unlike traditional mortgages, land loans come with unique rules, stricter terms, and higher interest rates. Whether you’re planning to build your dream home, start a farm, or invest, understanding how to fund your land purchase is the first step to turning your vision into reality.

In this guide, you’ll learn exactly how land loans work, which lenders offer them, the types of loans available (including VA and agricultural), and the step-by-step process to get approved.

What should I know before applying for a land loan?

Before applying for a land loan, you should understand the different loan types, property classification, credit requirements, and financing challenges compared to traditional home loans.

Most people assume buying land is just like buying a house, but it’s not. Lenders view raw land as a riskier investment because it doesn’t generate income or provide immediate utility. That’s why your eligibility and loan terms will differ dramatically depending on the kind of land you’re buying.

First, know your land classification:

• Raw land has no utilities, roads, or development.
• Unimproved land might have some infrastructure, like electricity or road access.
• Improved land is ready for construction with full access to utilities and permits.

The more developed the land, the lower the risk for lenders, and the better the terms you’re likely to get. You’ll also need to bring a solid credit score (680+), a bigger down payment (usually 20%–50%), and a clear plan for the land’s use. Expect more paperwork and a longer approval timeline than a typical mortgage.

How do I choose the best loan for buying land?

To choose the best loan for buying land, you need to match the loan type with your land use, location, lender eligibility, and whether you plan to build immediately.

Not all land loans are created equal. The best choice for you depends on what you’re planning to do with the land, how soon you’re building (if at all), and where the property is located. Here’s a quick breakdown of your main options:

• Raw Land Loan – For undeveloped land. Higher interest rates and down payments.
• Unimproved Land Loan – Some infrastructure exists. Slightly better terms.
• Improved Land Loan – Ready-to-build lots. Easiest to finance.
• Construction-to-Perm Loan – Bundles land purchase and construction financing. Often required if building soon.
• VA Land Loan – For qualified veterans, but only if construction begins immediately.
• USDA Agricultural Loan – For farmland or rural development, with specific income/location rules.

When evaluating lenders, consider:

• Whether they specialise in rural or agricultural lending
• Their experience with the type of land you’re buying
• Terms like interest rate, repayment period, and prepayment penalties

Also, compare your state-specific programs For example, people buying land in Chennai or Kerala may find localised bank support, like SBI’s land loan offerings for Indian customers.

If you’re unsure, working with a land loan specialist or calling different banks for pre-qualification quotes can quickly help you narrow down your options.

“Want help making the right financing choice? Our Flight School program can walk you through every step.”

Can I use a home loan to buy land?

You generally cannot use a traditional home loan to buy land unless it’s part of a construction-to-permanent financing plan.

Standard home loans are designed for properties with existing structures—meaning the house must already be built, inspected, and appraised. Vacant land doesn’t meet that criteria, so banks typically won’t approve a conventional mortgage for it.

However, there’s an exception: a construction-to-permanent loan. This type of loan allows you to buy the land and fund the home build in one process. You’ll typically need:

• Approved building plans
• A licensed builder under contract
• A firm construction timeline

The lender releases funds in stages as the construction progresses. Once the home is completed, the loan converts into a traditional mortgage. This is ideal if your goal is to build immediately.

If you don’t plan to build within 12 months, you’ll need to explore other land loan types like raw or unimproved land loans, or alternative options such as seller financing or personal loans for small parcels.

What are the eligibility requirements for land loans?

Land loans require a strong credit score, a substantial down payment, verifiable income, and a clear plan for how you intend to use the land.

Because land is considered a riskier investment than a built home, lenders set stricter eligibility standards. Here’s what most banks or credit unions will look for before approving a land loan:

1. Credit Score

A credit score of 680 or higher is usually the minimum. For better interest rates and terms, aim for 700+. Lower scores can result in:

• Higher down payments (30–50%)
• Increased interest rates
• Shorter loan terms

2. Down Payment

Expect to put down 20%–50% of the land’s purchase price. The less developed the land, the more money you’ll need upfront.

3. Income & Debt-to-Income Ratio (DTI)

Lenders want to ensure you can repay the loan. You’ll need to provide:

• Proof of income (tax returns, W-2s, bank statements)
• A DTI ratio ideally under 43%

4. Land Use Plan

You’ll likely need a detailed plan for how you intend to use the land. This could be:

• Building a home within a defined timeline
• Agricultural operations
• Investment or resale strategy

In some cases, you may need to submit:

• A professional land survey
• Zoning confirmations
• Environmental tests or site appraisals

The more prepared you are, the more confidence your lender will have and the better your chances of approval.

What interest rates can I expect for land loans?

Land loan interest rates typically range from 4% to 9%, depending on your credit score, land type, lender, and down payment.

Unlike traditional mortgages, land loans come with higher interest rates because lenders take on more risk, especially when financing undeveloped land. The more remote or raw the land, the higher the rate.

Typical Interest Rate Ranges:

These are estimates, and your exact rate will depend on:

• Your credit score
• The loan term (15, 20, or 30 years)
• The down payment you offer
• Your lender (local credit unions often offer better rates)
• Whether the land is zoned residential or agricultural

Tips to Secure a Lower Rate:

• Increase your down payment to 30% or more
• Improve your credit score before applying
• Choose land with access to utilities or infrastructure
• Shop multiple lenders, especially community banks or Farm Credit Services

If you’re working with a coach or program like the Flight School, they can help you compare lenders and navigate the financial requirements confidently.

Can I get a VA or agriculture loan for buying land?

You can get a VA loan to buy land only if construction begins immediately, while agriculture loans are available for farming or business purposes with specific eligibility rules.

VA Land Loans (Veterans Affairs)

VA loans are among the most affordable ways to finance land, but they come with strict limitations. You can’t use a VA loan to buy land alone. Instead, the VA loan must be part of a construction package, which includes:

• Immediate plans to build a primary residence
• A licensed builder approved by the VA
• A blueprint and timeline for construction

Lenders offering these construction-based VA loans are fewer, so you’ll need to shop around. Some veterans also opt for separate land financing first, then refinance using a VA construction loan later, though this route adds costs.

Agricultural Land Loans

If you’re buying farmland, you’ll want to look at:

• USDA Farm Service Agency (FSA) Loans
• Farm Credit Services (regional co-ops)
• SBA 504 Loans for agri-business infrastructure

To qualify, you’ll typically need:

• Proof the land will be used for agricultural or rural development
• Experience in farming or a solid business plan
• Income documentation and collateral

These loans offer lower interest rates and flexible terms, but are heavily paperwork-driven and slow to process.

International Note: SBI Land Loans

For readers in India, banks like State Bank of India (SBI) offer dedicated land purchase loans (especially in areas like Chennai or Kerala), including:

• Agricultural land for registered farmers
• Plot loans for residential construction

SBI requires a clear title, no encumbrances, and construction within 2 years of purchase.

Which banks or lenders offer land loans?

Many banks, credit unions, and specialty lenders offer land loans, including major institutions like Wells Fargo and regional lenders such as Farm Credit and local credit unions.

Unlike home mortgages, land loans aren’t standardized across all lenders. Some banks offer them only in select states, others specialise in rural or agricultural lending. Your goal should be to find a lender who understands the type of land you’re buying, and is willing to walk you through the process.

National & Regional Banks:

• Wells Fargo and US Bank: Often finance improved lots with plans to build
• Chase and Bank of America: Limited land loan offerings—usually via construction loans
• Farm Credit Services: Excellent for rural/agricultural land purchases
• SBI (India): Offers plot loans and agricultural land loans with competitive interest (for readers in Chennai, Kerala, and beyond)

Credit Unions:

• Known for flexible lending terms
• Often have lower interest rates
• More likely to work with raw or unimproved land
• Check local institutions that specialise in land development

Online & Specialty Lenders:

• Some online lenders work with investors or rural developers, but may charge higher fees
• Always check for licensing and Better Business Bureau (BBB) ratings

Pro Tip: Programs like Flight School can connect you to lenders with land-specific expertise and even help you build a deal-ready proposal.

And don’t forget to consider local lenders in the area where you’re buying. They often know the zoning, taxes, and development plans, giving you an edge when negotiating terms.

What steps should I follow to apply for a land loan?

To apply for a land loan, you should research lenders, prepare financial documents, conduct a land survey, and submit your loan application with all required details and plans.

While it’s more complex than getting a standard mortgage, land loans follow a clear process. Here’s how to get started from the ground up:

Step-by-Step Land Loan Application Process:

1. Research and Shortlist Lenders
   Compare loan types, rates, terms, and borrower reviews. Prioritise lenders familiar with the region and land zoning where you plan to buy.
2. Get Pre-Qualified
   This helps you understand how much land you can afford, what down payment is required, and what your estimated interest rate will be.
3. Choose the Land & Conduct Due Diligence
   • Order a professional land survey
   • Check zoning restrictions, soil conditions, utility access, and easements
   • Evaluate future land use plans and surrounding development
4. Prepare Documentation
   You’ll need:
   • Proof of income (tax returns, pay stubs, bank statements)
   • Credit history
   • A detailed land use or construction plan
   • Title deed and appraisal (sometimes required pre-approval)
5. Submit Your Application
   Submit all documents along with your application to the selected lender. You may need to meet with a loan officer or provide follow-up items.
6. Review, Approval & Closing
   Once approved, review terms carefully. Finalise your closing documents, transfer the down payment, and take legal ownership of the land.
   

What should I do if I get rejected for a land loan?

If you get rejected for a land loan, you can improve your credit score, increase your down payment, or explore alternative lenders or seller financing options.

Loan rejection isn’t the end of your land-buying journey; it’s a sign that you may need to strengthen your financial position or take a different route. Start by understanding why you were rejected. Common reasons include:

• Low credit score
• High debt-to-income (DTI) ratio
• Unclear or risky land use plan
• Lack of utilities or zoning issues
• Insufficient down payment

Here’s what to do next:

1. Request a Detailed Explanation
   Lenders are required to tell you why your application was denied. This insight is key to fixing the issue.
2. Improve Your Application
   • Pay off debt to lower your DTI ratio
   • Raise your credit score above 680
   • Save for a larger down payment (30 %+ shows commitment.
   • Present a clearer plan for land development or resale
3. Consider Alternative Financing
   • Seller Financing: Some sellers allow you to pay in instalments directly without going through a bank.
   • Hard Money Lenders: Fast, asset-based loans with higher rates—suitable for short-term flips or bridge financing.
   • Local Credit Unions or Land-Friendly Banks: Smaller institutions may be more flexible than national banks.
4. Join a Land Investor Community
   Groups like The Land Geek’s Facebook Group often share lender recommendations, deal structures, and success stories that can guide you to the right path.

Mini FAQ:

Can I buy land with no money down?

It’s extremely rare, but some lenders may offer no-money-down land loans to highly qualified borrowers or through special programs like USDA rural development. In most cases, expect to put down 20%–50%.

Does the bank require an inspection of the land before approval?

Yes, many lenders require a land appraisal and/or site inspection to assess zoning, access, and market value. A professional survey may also be required to confirm boundary lines and legal descriptions.

How long does it take to approve a land loan?

Approval timelines vary, but you can expect it to take 30 to 60 days, depending on the lender, location, and how quickly you submit documents. Government-backed loans (like USDA or VA) may take longer.

Can I get a land loan with bad credit?

It’s difficult, but possible through seller financing, hard money lenders, or smaller local credit unions. However, rates will be higher and down payment requirements stricter.

Can I refinance a land loan later?

Yes. Once your land appreciates in value or you begin construction, you may be able to refinance into a lower-interest mortgage, especially if your credit improves or you bundle the land with a home build.

Need personalised help? Book a call with our team to explore financing options and avoid costly land loan mistakes.