Key Takeaways
What lenders actually want down on bare ground, why, and the specific programmes that ask for far less.
- Interagency guidance sets a supervisory loan-to-value limit of 65 percent on raw land against 85 percent on improved property, which is where the large down payment comes from.
- Local banks, credit unions and Farm Credit associations write most land loans, because they keep the loan on their own books instead of selling it.
- USDA Section 502 Direct can purchase and prepare a site with typically no down payment, but you must build and occupy the home as your primary residence.
- The Texas Veterans Land Board lends on bare land at a minimum five percent down over a fixed-rate 30-year term, up to $200,000.
- Seller financing is the fallback when a bank declines, because approval depends on the seller rather than on underwriting guidelines.
Financing raw land is not the same as getting a mortgage, and the buyers who struggle most are the ones who assume it is. A house-backed mortgage does not cover an empty parcel, so a land loan down payment starts from a different place and usually lands somewhere much larger.
This covers where that number comes from, which lenders actually write these loans, the two programmes that ask for far less than the rest, and what the payment looks like. If you are earlier in the process, start with how to buy vacant land.
Quick verdict: assume a large down payment from a commercial lender and work down from there. If you are building soon, USDA Section 502 Direct or a construction-to-permanent loan is usually cheapest. If you are a Texas veteran, the Veterans Land Board is in a category of its own. If a bank declines you, seller financing is the reliable route. RawLand AI is a marketplace and not a lender, so this is general information rather than financial advice, and the figures below move with the parcel, your credit and the lender.
How Much Down Do Lenders Want on Raw Land?
More than on a house, and there is a published reason rather than a rule of thumb.
The Interagency Guidelines for Real Estate Lending Policies set supervisory loan-to-value limits by category for federally regulated lenders:
| Loan category | Supervisory LTV limit |
| Raw land | 65% |
| Land development | 75% |
| Construction, commercial and multifamily | 80% |
| Construction, 1 to 4 family residential | 85% |
| Improved property | 85% |
A regulated lender working to that guideline on raw land is looking for 35 percent down before anything else is discussed. On improved property the same guideline implies 15 percent.
These are supervisory limits rather than a hard legal ceiling, and individual lenders set their own policies above or below them. But it is why the number you are quoted on bare ground looks nothing like a mortgage, and it is a far better anchor than any range you will read elsewhere.
The practical lever is the word “raw”. Every step toward improved, legal access, a recorded survey, power at the road, a perc test on file, moves the parcel up that table. Our due diligence checklist covers what to confirm and in what order.
Why Is Raw Land Harder to Finance Than a House?
Because of what the lender is left holding if you stop paying.
If a borrower defaults on a home, the lender forecloses and sells a house that someone wants to live in. If a borrower defaults on a bare parcel, the lender is left with ground that is slow to resell and harder to value, with no rental income and no occupant. Land is also the asset people walk away from first, because nobody lives on it.
That risk shows up in three places at once: a larger down payment, a rate above a comparable home mortgage, and a shorter term, often with a balloon payment that forces a refinance or payoff before the loan fully amortises.
Ask about the balloon specifically. It is the term most buyers overlook and the one most likely to cause trouble, because it sets a deadline you have to meet with a refinance, a sale or cash.
What Are Your Options?
Seven realistic routes, and the right one depends on whether you are building, farming, holding or running a business.
| Option | Best for | Down payment | Note |
| Bank or credit union land loan | Most buyers of buildable lots | Guided by the 65% supervisory LTV | Portfolio loans, shorter terms |
| USDA Section 502 Direct | Low-income buyers building a rural home | Typically none | Must build and occupy as primary residence |
| Farm Credit association | Rural, farm and recreational land | Set by each association | Borrower-owned cooperative lenders |
| Texas Veterans Land Board | Eligible Texas veterans | Minimum 5% | Bare land, 30-year fixed, up to $200,000 |
| Seller financing | Buyers a bank declined | Negotiated | The seller carries the note |
| HELOC or home equity loan | Homeowners buying a small parcel | Based on home equity | Your house is the collateral |
| SBA loan | Land supporting an operating business | Set by the programme | Owner-occupied business property |
Cash is the eighth route and the strongest offer, at the cost of tying up money in an illiquid asset.
Most buyers stop at the first bank that says no. The list above is the reason not to.
How Do Bank and Credit Union Land Loans Work?
Small local lenders approve these far more often than national brands, and the reason is structural.
Most land loans are portfolio loans, meaning the lender keeps them on its own books rather than selling them into the secondary market. There is no agency guideline forcing a standard product, so a local bank or credit union can judge a parcel on its merits, especially in a county it knows.
The lender is weighing three things: your credit and income, your down payment, and the parcel itself. A buildable lot near existing utilities is an easy approval. A remote parcel with no legal access is a hard no at any credit score, because the collateral is the problem rather than the borrower.
Bring a specific property with a clear price and confirmed access rather than a general enquiry. Browsing for a buildable lot before you apply makes the conversation concrete and shows the lender you have done the work.
Never stop at one quote. Rural credit unions and Farm Credit associations frequently beat commercial banks on both rate and down payment for exactly this kind of collateral.
Can You Get a 30-Year Land Loan?
From a commercial lender, rarely. From two specific programmes, yes.
Most bank and credit union land loans amortise over ten to twenty years, and many carry a balloon. But two public programmes lend on land over much longer terms.
USDA Single Family Housing Direct, Section 502. Funds “can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.” The programme page states that no down payment is typically required, that the payback period runs up to 33 years, and 38 years for very low income applicants, and that the rate can be as low as 1 percent once modified by payment assistance. The published direct rate was 5.250 percent as of September 2026.
The conditions are real. You must be unable to obtain credit elsewhere on reasonable terms, meet the area income limit, and agree to occupy the property as your primary residence. It funds a home site, not speculative acreage.
The Texas Veterans Land Board. This is the one almost nobody writes about. The Texas General Land Office runs a land loan for eligible veterans, service members and certain surviving spouses at a minimum five percent down payment on a fixed-rate 30-year term, up to $200,000, or $275,000 where two eligible veteran spouses buy the same tract.
It is for bare ground: the programme states that “no value will be given to any improvements on tracts”. The parcel must be at least one acre excluding any dedicated public roadway, must have legal access to a public road, and cannot be zoned strictly for commercial use.
Note what that combination means. Five percent down over thirty years on raw land is the opposite of the terms a commercial lender offers, and it exists because a state agency, not a bank, is carrying the risk. If you are a Texas veteran, check this before you talk to anyone else.
What Do USDA and Farm Credit Actually Fund?
Government rural money is generous and narrow. Read the eligibility before you build a plan on it.
USDA Rural Housing Site Loans, Sections 523 and 524, come up constantly in articles about land financing and are not available to individual buyers. USDA’s own programme page restricts them to “private or public non-profit organizations” and federally recognised Tribes, which purchase and develop housing sites for low and moderate income families. Section 523 carries a 3 percent fixed rate, Section 524 a published below-market rate, and both are five-year loans.
The Farm Credit System is a different animal and it is the most underused option on this list. Its federal regulator, the Farm Credit Administration, describes it as “the largest agricultural lender in the United States” and “a nationwide network of lending institutions that are owned by their borrowers”, lending across agriculture, rural housing, farm-related businesses and rural utilities.
Because local associations are cooperatives that specialise in rural collateral, they routinely finance agricultural, timber and recreational parcels that a city bank will not consider. Treat a Farm Credit quote as a serious third bid alongside your bank and your credit union.
When Does Seller Financing Make Sense?
When the bank has said no, or when the parcel is one no bank will touch.
With seller financing the owner acts as the lender and you pay them in instalments. Approval depends on the seller, so credit that fails an underwriting screen can still close. The deal is documented as a promissory note with a deed of trust, or as a land contract, and the difference between those two matters a great deal: under one you take title at closing, under the other the seller keeps it until you finish paying.
That distinction is the whole decision, and our comparison of land contract vs mortgage sets out who holds title and what happens on default in each.
Down payments and rates here are negotiated rather than standard, which is precisely why no honest range exists. What does exist is a floor: the IRS applicable federal rate sets the minimum interest a seller-financed note can carry. Work out the terms before you argue about them, and start from the land contract down payment page rather than from a figure in an article.
Have a real estate attorney review whatever you are handed. This is general information, not legal advice.
What Does the Payment Actually Look Like?
Illustrative, not a quote. The rate below is an example chosen to show how the levers interact.
Say you buy a $60,000 parcel and the lender wants 25 percent down. You put down $15,000 and finance $45,000. At an illustrative 9.5 percent over 15 years:
- Monthly payment: about $469.90
- Total interest over the life of the loan: about $39,582
Shorten the term to 10 years at the same rate and the payment rises to about $582.29, while total interest falls to about $24,875. You pay roughly $14,700 less for the same parcel by taking the shorter term, if the monthly figure fits.
Run your own version before you talk to a lender. The owner financing land calculator handles the same arithmetic for a seller-carried note, including a balloon.
What Do Buyers Get Wrong?
Four mistakes, in order of what they cost.
Assuming a regular mortgage covers raw land. It does not, and finding out mid-deal is how buyers lose parcels.
Calling only national lenders. The approvals are at local banks, credit unions and Farm Credit associations, because those are the institutions keeping the loan.
Ignoring the balloon. A payment you can afford for five years is not the same as a loan you can clear in five years.
Over-borrowing on land that produces nothing. Raw land has no rent to cover the payment and closing costs are higher than buyers expect once survey, title and a perc test are added. Match the term to your real timeline and keep a cash cushion for carrying costs.
Behind all four: skipping due diligence. Access, zoning and buildability decide whether any lender will finance the parcel at all, so they are the first questions, not the last.
Line Up the Parcel Before the Loan
Lenders approve parcels, not intentions. The buyers who get financed walk in with a specific property, a confirmed access position and a price, which turns a vague enquiry into a credit decision.
Bring the lender something real. Find a financeable parcel, then take it to three quotes.
Frequently Asked Questions
How much down payment do you need for a land loan?
Federal interagency guidance sets a supervisory loan-to-value limit of 65 percent on raw land, which implies 35 percent down for a regulated lender following it, against 85 percent on improved property. Individual lenders set their own policies around that. USDA Section 502 Direct typically requires none, and the Texas Veterans Land Board requires a minimum of five percent.
Can you get a 30-year loan on raw land?
From a commercial lender, rarely. Most land loans run 10 to 20 years, often with a balloon. Two programmes go much longer: the Texas Veterans Land Board offers a fixed-rate 30-year term on bare land for eligible veterans, and USDA Section 502 Direct runs up to 33 years, or 38 for very low income applicants, when you build and occupy the home.
Why is raw land harder to finance than land with utilities?
Because the collateral is weaker. Undeveloped land with no legal access, water, sewer or power is slow to resell and harder to value, and borrowers walk away from it more readily than from a home. Federal guidance reflects that directly, capping raw land at 65 percent loan-to-value against 85 percent for improved property.
Can you finance land with bad credit?
Through a bank it is difficult. Seller financing is the common route, because the seller sets the approval bar rather than an underwriter, and approval turns on the down payment and the parcel more than the score. Expect to put more down. Choosing a parcel with legal access and utilities nearby also improves your odds anywhere.
Does RawLand AI provide land loans?
No. RawLand AI is a land marketplace, not a lender, so it issues no financing and this page is general information rather than financial advice. What it does is help you find buildable, financeable parcels and reach sellers directly, including those offering owner financing, so you arrive at a lender with a specific property.
Resources and Further Reading
- Interagency Guidelines for Real Estate Lending Policies, 12 CFR Part 365 sets the supervisory loan-to-value limits, including 65 percent for raw land against 85 percent for improved property.
- Texas General Land Office: Land Loans sets out the Veterans Land Board programme, a fixed-rate 30-year loan on bare land at a minimum five percent down.
- USDA Rural Development: Single Family Housing Direct Home Loans covers Section 502, including purchasing and preparing sites and the 33 and 38 year payback periods.
- USDA Rural Development: Rural Housing Site Loans confirms Sections 523 and 524 are limited to non-profit organisations and Tribes rather than individual buyers.
- Farm Credit Administration: FCA in brief describes the Farm Credit System as a nationwide network of borrower-owned lending institutions and the largest agricultural lender in the United States.
