A land loan is a specific type of mortgage that is used to finance the purchase of a piece of raw land with no improvements on it. These loans are typically used by individuals or companies that are looking to build a new home or develop the land in some way. Land loans typically have a higher interest rate and require a larger down payment than traditional mortgages, as the lender is taking on more risk due to the lack of a physical structure on the property. These loans typically have a shorter repayment period and may require the borrower to begin making payments on the loan before construction on the property is complete.
What Is A Land Loan?
The Benefits of Land Loans
- Allows for ownership of land
- Can be used for investment or development
- Offers potential for appreciation
- Potential for tax benefits
Who Should Consider a Land Loan?
- Individuals looking to purchase land for development or investment
- Landowners looking to refinance existing land mortgages
- Agricultural businesses looking to expand operations or purchase land for farming purposes (exclusions may apply)
- Have a credit score of at least 640
- Have a debt-to-income ratio of 43% or less
- Have proof of income
- Have a down payment of at least 35%
- Have a clear plan for the land’s use
- Be able to afford the monthly loan payments
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