The Truth About Land Loans: What Most First-Time Buyers Don’t Know
Buying land is a dream for many—whether it’s a quiet place to build a home, a hunting camp, or a long-term investment. But when it comes to financing that dream, many first-time buyers are surprised to learn that land loans are a different ballgame than traditional home mortgages.
If you’re just starting your land-buying journey, here’s what you need to know to avoid surprises and make smart, confident decisions.
What Makes Land Loans Different
Land loans aren’t one-size-fits-all. In fact, they’re often more specialized than home loans, and not every lender offers them. Here are a few key differences:
Larger Down Payments: While home loans might require 5–20% down, land loans often require 15–30% or more, depending on the property and your financial profile.
Shorter Terms or Balloon Payments: Some land loans have shorter repayment periods or balloon payments at the end, which means you’ll need a plan for refinancing or paying off the balance.
Different Interest Rates: Rates can vary based on the type of land, its location, and how you plan to use it.
Fewer Lenders: Not all banks or mortgage companies offer land loans. You’ll want to work with a lender who understands rural property and land financing.
Common Misconceptions About Land Loans
We often hear from buyers who assume land loans work just like home loans. Here are a few myths we like to clear up:
“I can use a regular mortgage lender.”
Most traditional lenders don’t offer land loans—or if they do, the terms may not be favorable. Specialized lenders like First South Farm Credit are built for this kind of financing.
“I don’t need a plan for the land yet.”
Actually, lenders want to know how you plan to use the land. Whether it’s for building, farming, or recreation, your intended use affects the loan structure.
“I’ll get the same rates as a home loan.”
Land loans often have different risk profiles, which can mean different rates. But working with the right lender can help you find competitive options.
What Lenders Look For
When you apply for a land loan, lenders will evaluate more than just your credit score. They’ll also consider:
The land’s location and accessibility. Is it easy to reach? Is there legal access?
Utilities and improvements. Does the land have water, electricity, or septic systems?
Your financial readiness. Do you have a down payment saved? Is your income stable?
Your intended use. Are you planning to build soon, or hold the land as an investment?
How to Prepare for a Land Loan
If you’re serious about buying land, here’s how to get ready:
Get prequalified. This gives you a clear idea of your budget and shows sellers you’re serious.
Know your numbers. Use a land loan calculator to estimate payments and understand what you can afford.
Work with a land loan expert. At First South Farm Credit, we specialize in rural land financing. We’ll walk you through the process and help you find a loan that fits your goals.
Kellan Martin, Branch manager based in Zachary, LA explains, “At First South we strive to make the experience of buying your first piece of rural land as simple as possible. We have a wide variety of loan structures to fit whatever it is you may need from recreational hunting land to timber sales, to cattle and row crop farming. The more information you can provide us at the beginning with your plans for the land can help us insure that we provide you with the most beneficial loan structure for you and your family.”
Land loans may be different—but they don’t have to be difficult. With the right information and the right lender, you can move forward with confidence.
If you’re ready to explore your options, our team is here to help. We’ve been financing land in the South for generations, and we’d love to help you take the next step.