: Lenders see this as the lowest risk, often offering the most competitive rates and lower down payment requirements. 2. Construction Loans
Buying a piece of land is the ultimate "blank canvas" for your future home or business. However, financing a plot of dirt isn't the same as getting a traditional home mortgage. Because there is no existing structure to act as collateral, lenders often view these loans as higher risk, leading to different terms and requirements. 1. Land Loans by Development Level types of loans to buy land
: For completely undeveloped property with no roads, electricity, or water. : Lenders see this as the lowest risk,
: For plots that are "build-ready," complete with access to public roads, water, and power. However, financing a plot of dirt isn't the
: These are the hardest to secure and usually require the highest down payments—often 35% to 50%.
If you plan to build immediately, a construction loan might be a better fit than a simple land loan. These are short-term (typically 12–18 months) and cover both the land purchase and the building costs. Land Loans: What You Should Know | First State Bank
Lenders categorize land based on how "ready" it is for use. This significantly impacts your interest rates and down payment requirements.