What Is A Land Loan And How Can I Get One?

Are There Other Ways To Fund A Land Purchase?

If you’re unsure about getting a land loan or construction loan for your building or development project, there are other ways you can finance land, too, including the following:

Seller Financing 

Seller financing is when the buyer and seller of a property work out the sale arrangements themselves without a bank or other financial institution involved. This can be a great option for borrowers that may not meet the credit score or down payment requirements for a regular land loan.

When buying a property directly from the seller, both parties will usually sign a land contract. This legal document records the sale of the lot and any other agreements between the two parties. When you finance a property directly through the seller, it’s important to note that you may hold equitable title of the lot but won’t technically hold legal title until you pay off the loan. Sellers are also entitled to enforce any personal restrictions or requirements they may wish to include, so it’s important to work with a reputable seller and make sure you know the exact terms of the loan agreement.

Home Equity Loan 

Another option for purchasing land is to use the equity you’ve built in your home to fund the purchase. A home equity loan is essentially a second mortgage made up of the equity you’ve built in your home. This can be withdrawn as a lump sum which you will repay in fixed installments. It may be easier to qualify for and finance land using funds obtained through a home equity loan because lenders consider it less of a risk, seeing as the funds are tied to your home as collateral. You may also secure lower interest rates going this route.

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