Bare land loans finance parcels without homes and come with higher lender scrutiny, larger down payments, and typically higher interest than finished-home mortgages. Approval hinges on parcel access, utilities, zoning, site conditions, and borrower credit. Options include lot loans, short-term land finance, and construction-to-permanent loans. Prepare a survey, confirm utility and zoning status, and shop lenders or a broker to match terms to your plans. For state-specific lender norms and exact down payment/term averages, verify with local lenders or updated industry sources.

Why people still buy land

Land remains an asset many buyers use to build a home, hold for appreciation, or develop later. Vacant (bare) land can be cheaper per acre than improved property, but lenders treat it as higher risk because it lacks utilities, roads, and sometimes legal entitlements.

What a bare land loan is

A bare land loan (vacant land or lot loan) provides financing to purchase a parcel without a home. Lenders evaluate the parcel's access, utilities, zoning, soil and flood risk, and your intended use. They also look at your credit, income, and overall assets.

How lenders price and structure these loans

Lenders typically require larger down payments and more documentation than for an existing-home mortgage. Down payments commonly range from about 20% to 50% of the purchase price . Interest rates are generally higher than for conventional home mortgages because vacant land carries greater risk.

Loan terms vary. Some lenders offer long-term fixed or adjustable-rate loans when a parcel is considered "lot-ready." Others provide short-term land loans or construction loans that convert to a mortgage once building finishes. Construction-to-permanent financing bundles the build phase and the long-term mortgage into one closing when available.

What affects loan approval

Key factors that influence approval and price:
  • Parcel access and road maintenance
  • Availability of utilities (water, sewer, electric)
  • Zoning and building permits
  • Site conditions (floodplain, soil, environmental restrictions)
  • Your credit score, debt-to-income ratio, and cash reserves
Improved lots (with utilities or permitted access) typically get better terms than raw, unimproved parcels.

Practical steps before you apply

  1. Get a current site plan and a property survey.
  1. Confirm zoning, setbacks, and utility availability with local authorities.
  1. Improve your credit and document stable income and assets.
  1. Shop lenders and compare lot-loan, construction, and construction-to-perm options.
  1. Consider working with a mortgage broker who has experience with land financing.

Risks and rewards

Buying bare land can be a lower-cost path to building your home or holding an appreciating asset. But vacancies can carry carrying costs (taxes, insurance, loan interest) and longer holding times. Expect higher upfront cash requirements and closer lender scrutiny compared to a conventional mortgage.

If you're serious about land, prepare documentation, verify utilities and permits early, and compare multiple lenders to find terms that match your timeline and budget. If you need local rules or typical lender terms in your state, check with a lender or real estate attorney for current details 1.

  1. Confirm typical down payment ranges (20-50%) for vacant land loans with current lender or industry sources (2025).
  2. Verify common loan term lengths and availability of long-term fixed-rate lot loans versus short-term land loans in the current market.
  3. Check state-by-state variations in lender requirements for utilities, zoning, and permitting that affect vacant land financing.

FAQs about Bare Land Loans

Do lenders finance raw land the same way they finance homes?
No. Lenders see raw land as riskier because it lacks utilities and improvements. They usually require larger down payments, more documentation, and charge higher rates than for an existing-home mortgage.
What down payment should I expect for a vacant land loan?
Down payments commonly range from about 20% to 50% of the purchase price, depending on parcel condition and lender policies .
Can a land loan convert to a mortgage when I build?
Yes. Construction-to-permanent financing or construction loans that convert to a long-term mortgage are common ways to move from land purchase to finished home financing when available from the lender.
What documents help my land loan application?
A recent survey/site plan, proof of zoning and permits, documentation of utility access, credit and income statements, and evidence of cash reserves strengthen an application.