Texas land loans let you secure a property and then build a home or business when you’re ready.
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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.
You’ve heard it said many times—everything’s bigger in Texas. That goes for the acreage in the Lone Star State, too; according to the U.S. Census Bureau, Texas has a whopping 261,268 square miles of land, offering plenty of space for everyone, ranchers and farmers included.
Even with all that acreage, it’s becoming more and more difficult for Texans to buy a piece of texas real estate. Prices are going up, especially with new and modern homes. Some turn to older homes or renovations as an alternative, but that can become time-consuming and cost-prohibitive, and you don’t always get the home you want. The good things about land purchases though is that your purchased land may serve as collateral for an eventual Texas construction loan.
With a Texas land loan, you can take a creative approach, nailing down the lot size and location you want and then building when the time is right. With the value per acre of land in Texas at an affordable $7542.04, per the New Estimates of Value of Land of the United States, you may find that buying acreage and then building in time is a much more manageable prospect, especially for vacation homes.
If you’re looking to purchase a vacant plot of land to build your dream home on, you’ll likely need to take out a land loan Land loans, also known as lot loans, allow buyers to finance the purchase of unimproved land. While they can be more difficult to obtain than traditional mortgages, land loans open up more possibilities for custom-built homes
I’ve purchased land in the past, so I want to share my top tips for finding the best land loan lender based on my personal experience. Here are the 5 best places to get a land loan:
1. Local Banks and Credit Unions
The first place I always check for land loans is local banks and credit unions Community lenders are often more familiar with the land in their area, making them more comfortable financing projects They may offer land loans at lower interest rates than national lenders.
I’d recommend starting your search for a land loan at the bank or credit union where you already have a relationship. Existing customers are more likely to get approved. Bring a detailed construction plan to show that you’re serious about developing the land. The more prepared you look, the better your chance of approval.
2. Online Lenders
If your local bank can’t approve you for a land loan, consider applying with an online lender like LendingHome or Lotus. Online lenders have gained popularity in recent years for offering quick approvals and competitive rates.
The convenience of applying online is a huge plus. You can submit all required documents electronically from the comfort of your home. Just be aware that land loans from online lenders typically require excellent credit (720+ credit score). Making a large down payment can also increase your chances of getting approved.
3. USDA Loans
If you plan to build in a rural area, look into U.S. Department of Agriculture (USDA) loans. USDA loans offer subsidized low interest rates to low- and moderate-income individuals in eligible rural locations.
For USDA land loans, you may qualify to purchase the lot with zero down payment required. The catch is that the land needs to be in a USDA-approved location and you must meet income limits. Use the USDA Property Eligibility Site to check if a property qualifies.
4. VA Loans
Veterans have access to VA land loans guaranteed by the Department of Veterans Affairs. VA loans offer favorable terms like no down payment requirement and no private mortgage insurance.
To qualify for a VA land loan, you must have served at least 90 days of active duty during wartime. I’d recommend checking your COE to confirm you meet service requirements before applying.
5. Seller Financing
If you’re having trouble getting approved for a land loan, seller financing allows you to purchase directly from the property owner. The seller carries the mortgage instead of going through a bank.
Seller financing gives buyers more flexibility, as sellers can set their own down payment and credit requirements. Just make sure to get every detail of your purchase agreement in writing. Know that the seller retains legal ownership of the property until you fully pay off the loan.
How Do Land Loans Work?
Now that you know where to find land loans, let’s go over the basics of how these specialized loans work.
The approval process for a land loan is similar to applying for a traditional mortgage. The lender reviews your credit, income, existing debts, and down payment amount to decide whether or not to approve you.
Since land itself can’t be used as collateral, lenders view land loans as riskier. Expect higher interest rates and larger down payments compared to a home purchase loan. Come prepared with a 20-30% down payment and excellent credit to improve your chances.
Once approved, you’ll pay off the loan principal and interest in installments over a set repayment term. A typical term is 5-30 years. Make every payment on time to avoid foreclosure.
After you finish constructing the home, you can convert the land loan into a conventional mortgage through refinancing. This lets you access better rates now that the house is built.
Pros and Cons of Land Loans
Land loans allow buyers to purchase vacant land, but they aren’t necessarily the right solution for everyone. Let’s look at some of the key pros and cons to consider:
Pros
- Build your dream home from the ground up
- Greater flexibility in home design and floor plan
- Potentially lower purchase price for vacant land
- Opportunity to renovate and resell for profit
Cons
- Higher interest rates than traditional mortgages
- Larger down payments required (often 20% or more)
- Cannot use land as collateral for lender
- Risk of construction delays or cost overruns
- Must convert to conventional mortgage once built
Carefully weigh the pros and cons based on your financial situation and homebuilding experience. Land loans give freedom in design but aren’t as accessible as conventional financing.
What Documents Do You Need for a Land Loan?
When applying for a land loan, be prepared to provide these key documents to your lender:
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Loan application – Provides your personal information and financial details. Most lenders have applications available online.
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Credit report – Lenders will check your credit score and history to assess your repayment ability.
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Proof of income – This verifies your income amount and sources. Provide recent pay stubs, tax returns, and W-2s.
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Construction plans – Detailed plans show the lender that you have a serious plan for building on the lot.
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Purchase agreement – This contract outlines the terms of the land purchase if you’ve made an offer.
Having all required documents ready will make the loan process much smoother. Ask your lender for a full checklist before applying.
Tips for Getting Approved for a Land Loan
Since land loans are riskier for lenders than mortgages, here are my top 7 tips for getting approved:
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Have excellent credit – Aim for a credit score of at least 720 or higher. Pay down debts and correct errors on your report.
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Make a large down payment – Put at least 20-30% down if possible. More equity reduces the lender’s risk.
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Lower your DTI – Keep your debt-to-income ratio below 43% by paying down other debts.
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Bring detailed construction plans – Prove to lenders you have a feasible building plan for the lot.
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Pick an improved lot – Financing is easier if utilities and roads are already in place.
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Shop local lenders first – Community banks are often more willing to finance land loans.
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Consider alternative options – Look into seller financing or home equity loans if you can’t get approved.
CommunityBank of Texas
CommunityBank of Texas is a community bank that offers big bank services. It is a division of Allegiance Bank and serves a significant portion of Texas. Among the loan offerings at CommunityBank of Texas are lot and land loans for individual homeowners who intend to build their future home.
We reached out to CommunityBank of Texas to discuss land loan details, which you can read about below:
- Lot loan may be to purchase a lot that currently has a structure to be torn down after purchase.
- Residential lot loans include term loans to the individual consumer to purchase a residential lot/land intended for their future home site (primary or second/weekend home site).
- Several lot products are available with a short or longer term maturity.
- Short term products are for homeowners that intend to build their home within that period. The short term loan options are interest only monthly while the homeowner uses that time to engage a contractor, design the plans & specs for the future home. T
- The longer term loan product is for buyers that do not plan to build in the near term
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.
Randolph-Brooks Federal Credit Union
Randolph-Brooks Federal Credit Union serves the Austin, Corpus Christi, Dallas-Fort Worth, and San Antonio areas of Texas with all of their banking needs. Randolph-Brooks Federal Credit Union offers a number of products when it comes to land loans to help meet customers’ needs when looking to purchase property.
We reached out to Randolph-Brooks Federal Credit Union to discuss land loan details, which you can read about below:
- Land loans available even if you are yet ready for construction
- Term options up to 15 years
- Free 60-day rate lock, once a specific property is identified
- Up to 90 percent loan to value financing
- No building requirements from the lender (subdivision requirements may apply)
- Option to set up automatic payments
- Additional qualifications including debt-to-income (DTI) limits are required to obtain 90% financing on land loans.
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.
How to Get a Land Loan (And What to Know Before You Do)
FAQ
Where is the best place to borrow money for land purchase?
Which loan is best for buying land?
How hard is it to borrow money to buy land?
What credit score do you need for a land loan?
How can I finance land?
Here are a few ways you might be able to finance land. 1. Bank or credit union loan While not every lender offers land loans, you’ll be able to find many banks and credit unions that do offer loans to buy land. There are also specialty lenders like farm credit organizations that offer land loans.
Where can I get a land loan?
When you’re ready to apply, consider the following sources for your land loan. Local banks and credit unions are more likely to offer land loans than traditional national banks. That’s because they’re more familiar with the land and better equipped to assess its value and potential.
Are land loans a good idea?
Land loans aren’t as common as traditional mortgage loans, though, so there are fewer options. With less competition between lenders, you could face a bigger down payment requirement, a higher interest rate and less time to repay the loan than you would with a traditional mortgage.
What type of loan should I take out when buying land?
The type of loan you take out will depend on where you’re buying land and how you intend to use the land. A land loan is sometimes confused with a construction loan, which is another type of loan often used by people looking to build a house.