Land Loans in Idaho: Everything You Need to Know

Purchasing land to build a home or farm on is an exciting next step for many Idaho residents. But land can be a major investment, often requiring financing help. That’s where land loans come in. Land loans also called lot loans help provide the funding to buy your ideal parcel of land in Idaho.

In this comprehensive guide we’ll cover

• What land loans are and how they work
• Types of land loans available in Idaho
• The land loan process from start to finish
• Tips for getting approved and finding the best rates
• Alternatives if you can’t qualify for a traditional land loan

Let’s start with the basics.

What Are Land Loans and How Do They Work?

A land or lot loan is a mortgage designed specifically to finance the purchase of vacant land. Land loans work similarly to a traditional mortgage or home loan. The lender provides a loan for the purchase price of the land, less any down payment. This loan is then repaid over time, typically 10-30 years, with interest.

With a land loan, the land itself acts as collateral for the loan. No structures need to exist yet. Land loans can be used to purchase land for:

• Building a primary residence
• Building a vacation home or cabin
• Future investment and development
• Farming and agricultural use

They allow the borrower time to prepare construction plans and obtain permits before needing to build. Many lenders will roll the land loan into a construction loan when you’re ready to start building.

Common Types of Land Loans in Idaho

Several different loan programs are available for financing land purchases in Idaho. The most common options include:

• Conventional land loans – Offered by banks and credit unions, these have flexible terms and competitive rates. Good credit is required.

• USDA land loans – For properties in rural areas. No down payment required and low rates. Credit and income limits apply.

• Seller financing – The seller finances a portion of the purchase directly. Typically shorter terms with higher rates.

• FHA land loans – Require only a 3.5% down payment. Best for those with lower credit scores.

• VA land loans – For veterans and service members. No down payment needed. Credit and service requirements must be met.

• Raw land loans – Specialty financing for completely undeveloped land. Typically have higher rates and shorter repayment terms.

Shop multiple lenders to find the best land loan program for your needs and finances.

The Land Loan Process Step-By-Step

If you’re considering a land loan, here is an overview of the typical process from start to finish:

1. Determine your budget – Factor in the purchase price, estimated closing costs, and any improvements you may need to make after purchasing. This will tell you how much you need to borrow.

2. Find the right lender – Research banks, credit unions, mortgage brokers, and farm credit institutions. Compare interest rates, terms, fees, and eligibility requirements.

3. Complete a loan application – Provide financial, income, and identification documents. Your credit history will be reviewed.

4. Get pre-approved – This shows sellers you are serious and ready to move forward. It also locks in an interest rate and loan terms.

5. Make an offer – Make an offer on the land contingent on final loan approval. Hire an attorney to review purchase documents.

6. Final loan approval – The lender will order an appraisal, title search, and survey to confirm all details before final approval.

7. Loan closing – Finalize paperwork, pay closing costs and fees. You’ll receive the loan funds to purchase the property.

8. Loan funding – The lender disperses funds to the title company to pay the seller. The land title transfers to you.

9. Begin your plans to build and develop the land into your dream property!

Tips for Getting Approved for a Land Loan in Idaho

It is possible to get approved for an Idaho land loan if you:

• Have a minimum credit score of 620 or higher
• Have steady income and employment history
• Make a down payment of 10-20% if possible
• Have manageable existing debts and sufficient assets
• Pick an affordable parcel of land within your budget
• Work with an experienced real estate agent familiar with land loans

Having previous land ownership or farming experience is also preferred by some lenders. Bringing in a co-signer with strong credit can help those who may not qualify on their own.

Shopping with several lenders and brokers can help you find the most competitive rates too. Ask about discounts for opening a checking or savings account with the lender. This can help lower interest rates.

What If You Can’t Qualify for a Traditional Land Loan?

If you have limited income or credit challenges, there are some alternative options to get financing:

• Sellers may offer financing – This avoids bank qualification requirements. Make sure terms are documented in writing.

• Find a private lender – Private individuals or companies that offer more flexible land financing at higher rates.

• Lease-to-own – Lease the land first, then purchase it outright after lease term ends.

• Buy land with others – Pool funds with family or partners to qualify for a larger land loan together.

• Improve your credit – Take 6-12 months to improve your score before reapplying. Get added as an authorized user on someone else’s account.

• Save up a larger down payment – Come up with 20-50% down to offset credit or income issues.

Don’t get discouraged if your first land loan application is denied. With some time and a smart plan, you can boost your chances of getting approved down the road.

Buying Land in Idaho – The Bottom Line

Buying vacant land to eventually build on can be an exciting and rewarding long-term investment. Land loans help make the dream of owning that perfect parcel possible. Do your homework on the types of financing available, sources, rates, and terms. Understand qualification requirements and have a solid budget in place. Preparation and diligently managing your personal finances will go a long way in getting your Idaho land loan approved.