Land Loans: How to Finance Your Dream Property

What Is a Land Loan?

A land loan (also called a lot loan) is a type of financing used to purchase a piece of land, whether you plan to build a home on it soon or hold it as an investment. Unlike a traditional mortgage, which covers both the home and the land, a land loan focuses solely on the property itself.

Because land loans don’t involve an existing home, lenders typically view them as higher risk—which means they often come with different requirements and down payment expectations. But with the right guidance and preparation, buying land can be a smart and rewarding step toward building your dream home.

The Three Main Types of Loans

Before applying for financing, it’s important to understand which type of land loan best fits your goals.

1. Raw Land Loan

Raw land is completely undeveloped—no utilities, roads, or existing structures. Because it requires significant development before you can build, this type of loan is considered the riskiest. Expect a larger down payment and a higher credit score requirement.

2. Unimproved Land Loan

Unimproved land may have some access to utilities or basic infrastructure, but it’s still largely undeveloped. It’s a middle ground between raw and improved land, and lenders may offer slightly more flexible terms.

3. Improved Land Loan

Improved land already has access to key services like electricity, water, and roads. Because it’s ready (or nearly ready) for construction, improved loans are typically easier to qualify for and come with better interest rates and terms.

How to Qualify for a Land Loan

Here’s what lenders generally look for when reviewing a land loan application:

• Strong credit score: Typically 680 or higher.
• Down payment: Usually 20%–50%, depending on the loan type.
• Detailed plans: Lenders want to see how you intend to use the land—especially if you plan to build soon.
• Appraisal: The land’s value will be assessed based on location, access, and nearby development.

At ALCOVA Mortgage, we work with buyers to find the right solution, whether you’re buying a lot to build on immediately or investing for the future.

Alternatives to Traditional Land Loans

If a traditional land loan isn’t the right fit, you may have other options:

• Construction-to-Permanent Loans: Finance both your land purchase and the construction of your home in one streamlined process.
• Home Equity Loans or HELOCs: If you already own property, you may be able to use your existing home’s equity to fund the land purchase.
• USDA Loans: In some rural areas, USDA financing can help eligible buyers purchase land and build their homes with low or no down payment.

Tips for Buying Land Successfully

1. Do your research: Check zoning laws, flood zones, and local building regulations before making an offer.
2. Get a survey: Ensure you know the exact boundaries and easements of the property.
3. Budget for development: If utilities or access roads need to be added, factor those costs into your financing plan.
4. Work with experts: Partner with a local lender like ALCOVA Mortgage that understands your market and your goals.

ALCOVA Mortgage: Your Partner in Building from the Ground Up

At ALCOVA Mortgage, we’ve helped countless buyers take the first step toward homeownership—starting with the land beneath their future homes. Our team understands that buying land isn’t just a purchase—it’s an investment in your vision.

Whether you’re ready to build right away or want to secure the perfect property for later, we’ll help you find the right loan, understand your options, and guide you through every step of the process.

Ready to Explore Land Loan Options?

Connect with your local ALCOVA Mortgage lender today to get started on financing your dream property.

Get Pre-Qualified Today →