Land loans give Arizonans a convenient way to make their dream home happen or purchase land for business or recreational purposes.
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JD MORTGAGE® connects you with lenders who want to help you purchase land. We find the lenders that offer terms specially tailored to your goals, whether it’s building your dream home or some other business, agricultural or recreational purpose.
Offered exclusively through Biglaw Investor, we make it incredibly simple to find the best loan for your land financing needs.
The Grand Canyon is indeed one of the most stunning sights in the world, let alone the Southwest, but Arizona has so much more to offer on top of this natural wonder. Across what is— according to the U.S. Census Bureau— 113,653 square miles of land, Arizonans can experience any one of a number of landscapes, creating a uniquely Southwestern lifestyle.
Given the relatively large size of Arizona in comparison to some other states, Arizonans have a lot of options when it comes to getting land. One approach to homeownership is to buy a parcel of land with a land loan and build a home over time. Per the New Estimates of Value of Land of the United States, the value per acre of land in Arizona is $4328.23. That means that Arizonans looking to buy land now and build later can do so at an affordable rate.
While construction loans in Arizona are for financing a new home build, a land loan lets you secure the land you want, then build when you want.
If you’re looking to buy vacant land in Arizona for a future home build or commercial development financing the purchase with a land loan is often the best option. Land loans from private lenders and banks allow buyers to secure the perfect parcel now while planning construction for later.
In this comprehensive guide, I’ll explain how land loans work, types of land loans, requirements, and tips for getting the best financing on raw or improved land in Arizona.
What is a Land Loan?
A land loan, also called a lot loan, is a mortgage specifically for financing the purchase of vacant land. It provides the funds to buy and hold the property until the owner is ready to build on it or develop it.
Land loans are offered by private lenders and banks in Arizona. They allow buyers to secure land now for future construction of a home, commercial building, or other development.
Common Uses for Arizona Land Loans
There are several scenarios where land loans are useful:
- Buying land for future custom home construction
- Purchasing commercial land for development
- Acquiring raw land as an investment
- Building infrastructure on raw land before constructing
- Bridging a short-term gap between land purchase and build
- Pulling equity out of land to use as down payment for construction
Land loans provide financing flexibility not offered by traditional mortgages.
Types of Land Loans Available in Arizona
You have several options when it comes to financing land purchases in Arizona:
Bank Land Loans
- Typically 10-30 year terms
- Require 20% down payment
- Lower interest rates than private loans
Private Land Loans
- Bridge loans and 1-10 year terms
- Higher down payments required
- Interest rates 8-15%
Seller Financing
- Owner carries loan for buyer
- Down payment usually 10-25%
- Interest rate negotiated with seller
Government Land Loans
- USDA, VA, and FHA land loan programs
- Specifically for eligible borrowers
- Lower down payments and interest rates
Land Loan Requirements in Arizona
When applying for a land loan in Arizona, here are some typical requirements:
- Down payment usually 20-50%
- Minimum credit score around 600
- Debt-to-income ratio below 50%
- Sufficient income/assets to build in future
- Land must appraise for loan amount
Requirements vary between private lenders and banks. Private land loans are more flexible.
The Land Loan Process in Arizona
If you’ve found the perfect parcel in Arizona, here are the usual steps to obtain financing:
- Choose lender and apply for pre-approval
- Make offer and negotiate price with seller
- Lender orders appraisal of land
- Loan underwriting verifies you qualify
- Finalize loan approval & down payment
- Close on land purchase
- Make payments until ready to build
Having pre-approval makes negotiating and closing faster.
Tips for Getting the Best Land Loan in Arizona
Follow these tips when seeking Arizona land financing:
- Shop multiple lenders to compare rates
- Look for fixed rates over adjustable rates
- Ask about prepayment penalties
- Seek 20-30 year loans for lower payments
- Get pre-approved early in the process
- Try to put down 20%+ as a down payment
- Consider owner financing from sellers
- Ask lenders about construction loan discounts
- Select experienced land loan lenders
The right lender and loan terms can save you substantially over the long run.
Pros and Cons of Land Loans
| Pros | Cons |
|---|---|
| Buy land now for future building | Require large down payment |
| Lock in low interest rates | Monthly payments without living on land yet |
| Build equity in land before construction | No immediate benefit until built on |
| One loan for purchase and hold | Rates higher than mortgage rates |
| More flexibility than traditional mortgage | Limited government program options |
Alternatives to Financing Land with a Loan
Some other options for funding a land purchase include:
-
Paying all cash if you have sufficient funds
-
Using a HELOC from another property
-
Borrowing from retirement account or life insurance
-
Crowdfunding and partnerships
-
Selling assets like stocks or real estate
Each option has pros and cons to weigh.
Frequently Asked Questions about Arizona Land Loans
How much does land cost in Arizona?
Vacant land prices range dramatically based on location, size, infrastructure, zoning, and other factors. Some parcels sell for $5,000 an acre while premium land can cost over $1 million per acre.
What credit score is needed for a land loan?
Requirements vary by lender, but in general credit scores of 620 or higher are preferred, with at least 660 needed for lower rates.
What size land loans can I get in Arizona?
Most lenders provide land financing from $50,000 up to several million dollars. Loan amounts are based on the appraised value.
Should I get pre-approved for a land loan?
Pre-approval allows you to shop for land knowing your price range and gives sellers confidence in your ability to purchase.
How much are the closing costs on a land loan?
Closing costs range from 2-5% of the loan amount. They include appraisal fee, application fee, title insurance, recording fees, and more.
What is the process for building on land after financing?
Once you own the land, you’ll need to obtain a construction loan to fund the building. Some lenders offer discounts on construction loans if you also got the land loan with them.
Find the Best Arizona Land Loan for You
Purchasing land is an investment in Arizona’s future growth. With proper financing, you can secure the ideal parcel for your needs and prepare for the next step when you’re ready.
This guide should provide a solid foundation for understanding land loans and how to get the best deal. Do thorough research, look at all your options, and consult an experienced lending professional.
The land loan process may seem complex at first. But with an knowledgeable lender guiding you, it can open the door to making your Arizona land ownership dreams a reality! You’ll be that much closer to someday building your custom home, expanding your business, or developing the land into income-producing assets.
Arizona Federal Credit Union
Started in 1936 and based in Phoenix, Arizona, Arizona Federal Credit Union is locally owned and a not for profit cooperative. Arizona Federal Credit Union offers products that can be used for lots that aren’t construction ready, as well as renovation loans.
We contacted Arizona Federal Credit Union to discuss land loan program details, which you can read about below:
- One-time close
- Adjustable rate loans with an initial fixed rate period of up to 10 years.
- Local decision making and draw disbursement approval.
- Can help with lot loans if you’ve found property but aren’t ready for construction.
When you’re ready to connect with a loan officer, use our form to quickly match with land and lot loan programs based on your specific circumstances.
America First Credit Union
American First Credit Union was started in 1939 in Salt Lake City, Utah which provides a number of loan products for construction. American First Credit Union offers products like lot loans, contractor built loans, self built loans, and construction loans to help people in the area to be able to build homes.
We reached out to America First Credit Union to discuss land loan details, which you can read about below:
- 10-year fully amortizing
- 20-year amortization with a five-year balloon
- 30-year amortization with a five-year balloon
- Up to 80% for purchase on fully improved residential lot where future owner-occupied home is to be considered.
- Up to 65% for purchase or refinance on fully improved residential lot held for investment
- Up to 50% for cash-out refinance on fully improved residential lot where future owner-occupied home is to be constructed. Maximum cash amount is $25,000
- Lot must be free of structures
- Origination is 1.00%
- Appraisal: $400 (varies based on area)
- Purchase contract (if applicable)
- Most recent pay stubs and W2’s for previous two years
- Tax returns if self-employed
- Two month’s financial institution account statements
When you’re ready to connect with a loan officer, use our form to quickly match with land and lot loan programs based on your specific circumstances.