The Top 7 Best Land Loan Lenders of 2023

Purchasing land to build a dream home can be an exciting endeavor. However, securing financing for a land loan can be tricky compared to a traditional mortgage. Not all lenders offer land loans and qualification requirements are often more stringent.

I’ve researched the top land loan lenders to help you find the right financing for your land purchase Whether you have plans to build now or want to buy and hold for the future, these lenders can help make your land ownership goals a reality

Overview of Land Loans

Also called lot loans, land loans allow you to purchase a plot of land for future residential or commercial development. Land loans provide an alternative path to home ownership for those who want to build rather than buy an existing property.

Land loans function similarly to mortgages but generally have higher interest rates, larger down payments, and shorter repayment terms. Borrowers need a solid credit score, stable income, and low debt-to-income ratio to qualify.

Once construction begins, land loans can be refinanced into a construction loan and ultimately into a conventional mortgage upon completion. This allows borrowers to access better rates down the line.

Factors to Consider When Choosing a Land Loan Lender

With land loans being riskier for lenders than mortgages, it’s important to shop around to find the best financing option for your needs. Here are some key factors to consider when researching lenders:

• Interest rates and fees: Compare rates and associated origination fees across multiple lenders. Even small rate differences can impact your total costs over the loan term.

• Loan terms: Loan repayment terms often range from 5-15 years for land loans. A longer term means lower payments but higher interest costs over time.

• Credit score requirements: Each lender sets minimum credit score thresholds. In general, you’ll need a score of at least 680 for consideration.

• Down payment expectations: Land loans typically require around 20-50% down. Lenders want to see you have skin in the game.

• Refinancing policies: Ask about each lender’s requirements for refinancing into a construction loan later. Easy refinancing can save you thousands.

• Specialization: Opt for lenders who frequently provide land loan financing over those who dabble. Their expertise can facilitate the process.

Now let’s explore my top picks for land loan lenders across various categories:

1. Farm Credit – Best for Rural Properties

Farm Credit funds over $6 billion in rural land loans each year. Their expertise in financing agriculture and development projects on rural land makes them my top pick for land loans on properties in eligible rural areas.

Land Loan Highlights:

• Available for raw, unimproved, and improved land
• 10% down payment required
• Rates as low as 5.25% as of January 2023
• 15- to 30-year repayment terms
• Credit score minimum of 680

Farm Credit also offers home construction loans, making them a one-stop shop. They have a cooperative network of 90 local offices across the country to provide personalized service.

2. NBKC Bank – Best for Low Rates

NBKC offers highly competitive rates on their land and lot loans, with excellent customer service ratings. Their streamlined online process makes financing simple.

Land Loan Highlights:

• As low as 5% down payment required
• Rates from 7.25% APR as of January 2023
• 5- to 15-year loan terms
• 680 minimum credit score
• Refinancing available

NBKC Bank services all 50 U.S. states. They have an A+ rating from the Better Business Bureau, indicating strong customer satisfaction.

3. Guaranteed Rate – Best for Easy Online Process

Guaranteed Rate makes getting a land loan straightforward through their easy online application and access to competitive rates.

Land Loan Highlights:

• 10% minimum down payment
• Rates as low as 7.3% APR as of January 2023
• Up to 30-year repayment terms
• 620 minimum credit score
• Online applications and document upload

Guaranteed Rate has helped over 1 million homeowners with financing and placed as one of the top mortgage lenders in 2022 studies. Their online process and home loan selection make them a convenient option.

4. LoanDepot – Best for Low Credit Score Options

For borrowers with credit scores in the fair range, LoanDepot can provide more land loan opportunities. Their minimum credit score requirement is just 600.

Land Loan Highlights:

• Up to 95% financing available
• Minimum 600 credit score
• 5- to 30-year loan terms
• Construction loans offered
• Available in 50 states

LoanDepot has over $100 billion in funded loans and an A+ rating from the Better Business Bureau. Their land loan program gives fair credit borrowers a viable path to financing.

5. Pentagon Federal Credit Union (PenFed) – Best Credit Union Financing

PenFed offers affordable land loan financing, with rates starting under 6% APR for members. Their not-for-profit structure helps them keep costs low.

Land Loan Highlights:

• 5% minimum down payment
• Rates from 5.75% APR as of January 2023
• 15-year terms up to 80% loan-to-value ratio
• 20-year terms up to 90% loan-to-value ratio
• 660 minimum credit score

Membership in PenFed is open to all. Their land loans include an easy construction loan conversion process. PenFed has an A+ rating from the Better Business Bureau.

6. NASA Federal Credit Union – Best for Construction Loan Conversion

NASA Federal Credit Union offers a fantastic construction-permanent program allowing easy conversion from a land loan to construction financing when you’re ready to build.

Land Loan Highlights

• 15% down payment required
• Rates from 6.99% APR as of January 2023
• Up to 30-year repayment term
• 680 minimum credit score
• Seamless construction loan conversion

Membership in NASA Federal Credit Union is open to all. They offer nationwide lending and have provided over $5 billion in mortgage loans. Their construction-permanent program streamlines the land to construction transition.

7. Shared Equity Mortgage – Best for Affordability

Shared equity mortgages from Home Partners of America offer a unique affordable financing option. You put down as little as 3%, while Home Partners provides the remaining equity.

Land Loan Highlights:

• 3% minimum down payment
• Share equity and appreciation with Home Partners
• Pay a monthly lease fee instead of interest
• Credit score minimum of 600
• Convert to a traditional mortgage after 5 years

This innovative shared equity model allows you to buy land with little money down. It makes ownership attainable if you have limited funds saved but want to build.

Finding the Best Land Loan Lender for You

Purchasing land is an investment in your future. Finding the right lender to finance your purchase is key to making your land ownership dreams a reality.

The lenders above demonstrate that land loans are attainable for a broad range of buyers, from those with exceptional credit to more challenged scores. Whether building in the countryside or suburbia, the diverse offerings of these top land loan lenders can help you secure the perfect site.