Land Loans in California: A Guide for 2024

Land loans give Californians a convenient way to make their dream home happen or purchase property 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.

California is one of the most diverse and dynamic states in the Union, with a little bit of something for everyone. Whether you like the casual glamor of Los Angeles or the stunning terrain of the Sierras, California offers space for you to build your dreams.

According to the U.S. Census Bureau— the Golden State is comprised of some 155,858 square miles of land, including of course metro, suburban and rural areas. Californians who are interested in buying land and then building a home in due course have a wide range of options out there.

Per the New Estimates of Value of Land of the United States, the value per acre of land in California is $39,091.83. That means that Californians looking to buy land now and build later can do so at a relatively affordable rate, given the size of the California economy and the cost of pre-built homes.

While construction loans in California are for financing a new home build, a land loan lets you secure the land you want, then build when you want. This is especially convenient for those who are trying to build in pricey areas or those who are building vacation homes.

California is well-known for its gorgeous coastlines rugged mountain ranges fertile farmlands, and sprawling metropolitan areas. With so much diverse landscape, it is no wonder many want their own piece of paradise. For those looking to purchase vacant land in California, land loans can provide the financing needed to make dreams a reality.

What is a Land Loan?

A land loan, also known as a lot loan, is a loan specifically for purchasing a vacant piece of land. Land loans differ from traditional mortgages in a few key ways:

Land loans typically require a higher down payment, often 20-35% of the purchase price
Land loans have higher interest rates than traditional mortgages. Rates can range from 8-15%.
Land loans don’t require property insurance since there are no structures on the land,
Loan terms are shorter, usually 1-5 years.

Land loans allow buyers time to finalize plans and obtain construction financing before building on the property. They provide flexibility in cases where quick financing is needed to secure a desired parcel.

Common Uses for Land Loans

There are several common uses for land loans in California:

Future primary residence: Buying land for a future primary home allows buyers to purchase in desirable locations and build when they are ready.
Second home/vacation property: Land loans enable buyers to secure land for a future vacation home or recreational cabin.
Agricultural use: Farmers, ranchers, and agricultural businesses can use land loans to expand operations by purchasing additional acreage.
Commercial use: Investors and developers utilize land loans to acquire land for future commercial buildings or projects.
Land holding: Some buyers use land loans simply to hold land for investment purposes long-term.

Qualifying Criteria

While land loans have more flexible qualifying criteria than mortgages, buyers still must meet certain standards to get approved. Typical requirements include:

Down payment: 20-35% down is usually required. Higher down payments can lead to better rates.
Credit score: Minimum scores between 620-680 are common. Better scores may qualify for lower rates.
Debt-to-income ratio: Maximum ratios around 45% are standard. Lower ratios are preferable.
Loan purpose: Loans must be for approved uses like building a primary home. Pure land speculation is often prohibited.
Loan term: Most lenders offer 1-5 year terms. Longer terms may be available depending on the purpose.
Parcel requirements: Land must be suitable for intended use with proper zoning and utilities access.

Meeting these criteria demonstrates a borrower’s ability to repay the loan. Having significant assets, reserves, and moderate existing debt also helps buyers qualify.

Top California Land Loan Lenders

Several lenders specialize in land loans for California properties. Here are some top options:

Cal-Lending: Offers land loans up to $2 million for future primary residences, second homes, and agricultural properties.
Citizens Bank & Trust: Provides land loans for primary and secondary home construction. Local processing and decision making.
California Bank & Trust: Finances up to 60% of land purchase price. One closing saves on costs.
California Land & Construction: Features land loans starting at $200k for primary or second homes. 36 month terms available.
AgAmerica Lending: Focuses on agricultural land loans but also finances recreational properties. Loans from $150k.

Shopping rates from multiple lenders helps buyers find the most competitive loan for their particular land purchase.

Land Loan Process

The land loan process contains a few key steps:

1. Find the property

Search for land parcels that meet your size, budget, zoning, and utility needs. Research county records for sale history, boundaries, easements, etc.

2. Apply for pre-approval

Submit loan application and documentation so lenders can verify your qualifications. This shows sellers you are serious.

3. Make an offer

Once pre-approved, make an offer on your chosen land. Hire professionals to confirm zoning codes and restrictions.

**4. Complete loan underwriting **

Provide updated documentation for final underwriting. Get appraisal done. Lenders validate you still qualify.

5. Close on the loan

Finalize the deal by signing loan documents and transferring funds. The property deed transfers to you.

6. Make payments

Begin making monthly payments on your land loan. Interest payments are not tax deductible like a mortgage.

7. Obtain construction financing

When ready to build, work with lenders again to get a separate construction loan for your project.

Completing these steps results in the land becoming yours so you can start building your California dream.

Tips for Getting a Land Loan

Here are some tips for successfully getting a California land loan:

Shop rates from multiple lenders to get the best deal. Local lenders may offer better knowledge of the area.
Opt for shorter loan terms if possible. This minimizes interest costs over the life of the loan.
Put down as large of a down payment as you can afford. Higher down payments lead to better loan terms.
Keep your debt-to-income ratio low by paying down existing debts. Lower ratios make qualification easier.
Purchase land below your maximum approval amount. This provides a safety buffer if the appraisal comes in low.
Find land with proper zoning and utility access to avoid delays. Confirm no easements or restrictions prohibit building.
Be ready to move quickly if bidding against other buyers. Pre-approval will give you a competitive edge.

Following these tips will lead to a smoother land loan process and better financed California property.

Key Takeaways

Land loans enable buyers to purchase and hold land before obtaining construction financing. This provides flexibility in competitive, high-cost markets.
While land loan qualification is not as rigorous as mortgages, buyers still must have good credit, income, and cash reserves to be approved.
Several lenders specialize in land loans for California properties like future primary homes, second homes, farms, and commercial projects.
Paying down debts, making large down payments, finding properly zoned land, and acting quickly are key tips for successfully getting a land loan.

For those looking to buy vacant land in California, land loans present an excellent financing option to turn dreams into reality. Following the guidance above will lead to securing the perfect loan for your piece of paradise.

Citizens Bank & Trust

Based in North Alabama, Citizens Bank & Trust provides a number of services for those living in the area and looking to invest in property. Citizens Bank & Trust offers land loans and construction loans to help with the purchase of property as well as the building on property.

We reached out to Citizens Bank & Trust to discuss land loan details, which you can read about below:

Available for home construction or land
Available for primary residence or secondary home construction
Draw system: funds can be disbursed in stages as construction progresses
May roll into permanent loan, saving on closing costs
Local decision-making and processing

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.

Let the best bank win

I’m an associate at a firm in Houston and used JD Mortgage thanks to your advice! The experience was great—they were super fast and responsive.” —Mary Kate Raffetto Beck Redden LLP

For a JD Mortgage, I had good luck with IBERIABank. [They] made this process very smooth.” —Clint Cowan Lynn Pinker Hurst & Schwegmann

Purchasing land with a land loan is one way to buy in an expensive area.
A lot loan has no insurance requirements.
Sometimes called lot loans, these loans let you build when you want.

How to Get a Land Loan (And What to Know Before You Do)

FAQ

Can you get a land loan in California?

4. California Land and Construction Loans Minimum down payment for land loans is 20% depending on the size of the loan and qualifications. Minimum loan size is $200,000. Short term financing for a residential lot that will be built on within the next 3 years. Intended for primary or second home construction.

Which loan is best for buying land?

A plot Loan is a type of loan given by financial institutions (also referred to as ‘lenders’) such as banks and Housing Finance Companies (HFC) for purchasing a residential plot or land. A Plot Loan is similar to a home loan, with a difference lying in the usage of the loan amount.

How hard is it to borrow money to buy land?

A land loan is more complex than a standard mortgage. For one thing, there’s no home to act as collateral for the land loan. And normally, you can’t buy land with no money down. There are also several different types of land loan, designed to facilitate different uses for a land lot.

Where is the best place to borrow money for land purchase?

Check your local Farm and Ag credit unions. They’ll usually finance raw land. The rates are a little higher than a conventional loan (usually . 5-1 point higher), requires more down (20% instead of 10), and shorter terms (20 year instead of 30). But they’re out there.

Who is California land and construction loans?

California Land and Construction Loans have been providing building loan services in California for over 35 years. California Land and Construction Loans offer land loans for a number of purposes, including purchases as well as refinancing and for all types of properties.

What is a land loan in California?

Does Cal-Lending offer land loans?

Cal-Lending offers a number of loan products to meet the needs of people looking to purchase land, build, or remodel most property types in California. Some of the products that they offer are lot and land loans for metro, urban, and suburban residences and agricultural and rural land loans.

Can you finance a land loan in California?

We have access to both private and institutional funds and can help with your land loan request on both small lots and large acreage, as well as improved and unimproved land. If the land you are looking to finance is located in California, give us a call to discuss your scenario.