Buying land to build a home or farm on in Arizona can be an exciting endeavor, but it also requires careful financial planning. Using a land loan calculator is an essential first step to determine if your dream property fits within your budget. I recently went through the process of purchasing vacant land in Arizona myself, and I want to share some of what I learned to help others navigate land loans in this beautiful state.
A land loan, also called a lot loan, is financing specifically for purchasing empty plots of land. These loans work similarly to traditional mortgages in that you’ll make monthly payments over a set loan term. However, land loans typically require higher down payments, shorter terms, and higher interest rates compared to home loans.
Land loans allow you to spread out the cost of your land purchase over time rather than paying the full price upfront in cash This makes buying affordable acreage or lots possible for more people When used strategically, land loans can be a smart way to get your property secured so you can take your time designing and building your custom home.
How a Land Loan Calculator Helps
Using an online land loan calculator is one of the first steps I recommend to get a realistic idea of potential land loan costs. Here’s a overview of how these helpful tools work:
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Input purchase price – Enter the total price of the land you want to buy
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Down payment amount – Specify how much you can pay as a down payment. Land loans often require 20-50% down.
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Interest rate – Estimate the rate based on current averages and your credit score. Rates are typically 6-10%.
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Loan term – Land loans usually range from 5-20 years. Shorter terms have higher monthly payments.
The calculator takes these inputs and estimates your:
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Monthly payment – This is the regular monthly amount you’ll owe,
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Total interest – How much interest you’ll pay over the full loan term.
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Total cost – The purchase price plus all interest paid.
Use these estimates to evaluate if the land purchase fits your financial situation. Tweak the inputs to model different down payment and term scenarios.
I recommend running calculations on multiple land loan calculators to compare. Here are two I found helpful:
Land Loan Requirements and Process
While a land loan calculator provides initial estimates, the actual loan you qualify for depends on your financial profile and the lender’s requirements. Here are some common requirements to be aware of:
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Down payment – Typically 20-50% is required. Some lenders may allow less with a higher interest rate.
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Credit score – Score of at least 620, but 720+ is ideal for the best rates.
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Debt-to-income ratio – Lenders want to see you can afford the new loan payment.
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Loan purpose – Most require plans to build on the land within a few years.
The application process is similar to a mortgage:
- Submit loan application and documentation
- Loan officer reviews and provides pre-approval
- Once offer on land is accepted, full approval required
- Appraisal and title search performed
- Final loan approval secured
- Closing and land transfer complete
I recommend getting pre-qualified so you know your price range when making offers. Don’t hesitate to ask your loan officer questions throughout the process!
Finding the Right Arizona Land Loan Lender
With an understanding of land loan basics and average costs, you’re ready to find a lender that meets your needs. Here are some tips for evaluating lenders:
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Local expertise – Find a lender very familiar with land loans in your specific area. Local market expertise is valuable.
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Competitive rates – Shop and compare interest rates from multiple lenders. Even small rate differences add up over the loan term.
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Flexible terms – Each lender has their own requirements and programs. Find one that matches your financial situation.
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Strong customer service – You want an accessible loan officer to guide you through the complex process.
Some top lenders I recommend considering for Arizona land loans:
- Local credit unions and community banks
- Large national lenders like Wells Fargo and Bank of America
- Specialized land loan lenders like LandSearch Financial
- Arizona-based banks like WaFd Bank
Home Equity and 401(k) Loans
Finally, if you have sufficient equity in your home, you might consider borrowing against it to pay for your land purchase. The advantages here are clear. Home equity loans are fairly easy to obtain (assuming, of course, that your credit is in decent shape and your mortgage payments have been handled responsibly). Home equity lines of credit also carry fairly low interest rates, and very favorable repayment terms. Depending on the cost of the land you are planning to purchase, this can be an ideal solution.
Using the assets in your 401(k) to buy land may be an option, but only if your employer is willing to allow you to borrow money from the companys retirement plan. There is no law requiring employers to allow employees to borrow from their existing 401(k), so this option may not be available to everyone. Its worth noting, however, that even if you are authorized to borrow against your 401(k) you will only have access to a limited short term loan. Depending on the cost of the land you want to purchase, this may or may not be sufficient. Having said that, borrowing against your retirement savings can be a lower cost alternative to traditional financing.
Land loans are typically more difficult to obtain than other secured loans, but any challenges to your loan application can be overcome if you have a definite plan in place to improve the land and increase its value as an investment opportunity for your lender.
As with any loan, you should be prepared to shop around for the best options, and take the necessary time to secure the best deal possible. Because land loans are considered riskier investments, they often come with more restrictive terms and conditions, so it is doubly important to understand your current financial status and to have a plan in place to repay the debt on time and in full. Borrowers have very little wiggle room when it comes to land loans, and it pays to think a few steps ahead. As always, before signing any contracts be certain that you fully understand the terms and conditions of your loan, and your responsibilities as a debtor.
Current Personal Loan Rates
Buying a parcel of land, either as a long term investment or on which to build a new home, is not quite as simple as you might think. Unless youre in a position to pay cash up front, youll need to borrow some money to finance the purchase. But borrowing money to purchase raw land is not quite that straight forward.
Land loans are unique financial products, and they are handled differently than mortgages and other secured loans. If youve never purchased land before, you may find the process a bit more challenging than you expected. But a short primer should help you understand how land loans work, and what your options are when looking for a lender.
Can I use my land as down payment for a construction loan?
FAQ
Can you finance land in Arizona?
What is the longest loan you can get for land?
What is a good credit score for a land loan?
Which loan is best for buying land?
What is a Land Loan Calculator?
This land loan calculator is a fixed interest loan calculator. That means that your interest rate as well as your payment remains fixed during the life of your land mortgage. As time passes, more of your payment goes toward loan principal and less towards the interest.
How do I calculate land financing payments?
Calculate land financing payments for buying acreage and lots with our land loan calculator. Get monthly payments based on land contract price, interest rate, and down payment. View land prices to explore affordability. Estimate only — finance availability and payments will vary. Closing costs and other property expenses may apply.
What is a land loan amount?
Land Loan Amount – The original amount of your land loan when it started or when it will start. Loan Term Years – The original length of your land loan. Interest Rate – The rate of interest on your land loan. Monthly Payment – The calculated monthly payment on your land loan.
How much does a land loan cost?
The monthly land loan payment would be $1,060.66 for 10 years. Once you have found your loan payment amount, you can now find your total payment amount and the total interest cost of your land loan. Your total land loan payments would be your regular loan payment amount multiplied by the number of payments that you have to make.
What is a fixed interest Land Loan Calculator?
Generally speaking, this is a fixed interest land loan calculator. The way fixed interest calculator’s work is that your payment remains level during the life of the loan. With each passing monthly loan payment, more of your payment goes toward principal, and less money goes towards paying interest.
How many payments do you make a year on a land loan?
A loan term of 10 years would then be 10 years x 12 payments per year = 120 payments. Similarly, there are four quarterly payments in a year. If you make quarterly payments for 10 years, it would be 4 x 12 = 48 payments. Your land loan lender will usually give you a quote for an annual land loan rate.