You have land under contract. You did everything right. Then the bank calls and says no, or worse, says "maybe" three weeks in and asks for another appraisal. Your closing date does not move. Now what?
I hear this story every week. The good news: a bank no is usually about the bank, not the deal. Here is why it happens and how to still close.
Why do banks deny land loans?
Raw land has no building and no income, so most banks see it as risky and hard to sell.
Banks like loans they can sell or hold with little work. Raw land does not produce rent, often has few comps, and takes longer to resell if the loan goes bad. So many banks either do not make land loans at all, or only make them to existing customers with big down payments and plans to build soon.
The usual reasons we hear from borrowers:
- The bank does not lend on vacant land at all
- The appraisal came in low because there were few land comps
- The bank wanted a much bigger down payment
- Your income or debt ratio did not fit their box
- You plan to resell, and the bank wants a long term hold or a building plan
- The timeline did not fit your closing date
The takeaway: a bank no tells you the bank's rules. It does not tell you the deal is bad.
Bank said no?
We lend on vacant land only. $30K to $1M, 20% down, no appraisal, close in about 7 days.
Get a Free QuoteSee Hard Money Land LoansWhat should I do first after a land loan denial?
Ask for the reason in writing, then call your seller about the closing date.
Know exactly why you were denied. A low appraisal needs a different fix than a debt ratio problem. Then tell your seller early. A seller who hears about a problem on day 25 is less flexible than one who hears on day 10. Most sellers will give a short extension to a buyer who already has a new lender lined up.
Can a private lender fund a land deal the bank turned down?
Often, yes. A private land lender looks at the land and your exit, not just your paperwork.
A private land lender values the land from land comps, lends a set percent of that value, and plans around how you will sell. We fund land flips, subdivides, and land you will sell on terms. We close in about 7 days with no appraisal. The rate is higher than a bank's, which is why it works best for short holds.
Every loan carries a personal guarantee and is for business purposes. See the terms on our hard money land loans page.
What are my other options after a bank says no?
Private loan, cross collateral, seller financing, or an equity partner.
| Option | Best when | Note |
|---|---|---|
| Private land loan | You have 20% down and a clear exit | About 7 days |
| Cross collateral | You own other land with equity | Up to 100% financed |
| Seller financing from the seller | The seller will carry a note | Depends on the seller |
| Equity partner plus a loan | You have the deal but not the down payment | Partner puts in the 20% |
| Pay cash | Small deal, cash on hand | Fastest |
With cross collateral, you pledge one other property you own and we can fund up to 100% of the purchase. For more structures, see creative deal structures.
When is a bank still the better choice?
When you will hold the land for years and the bank can close on time.
If you plan to hold land five years or build on it yourself, a bank or farm lender is cheaper. I would avoid paying 14% interest for a long hold. A bridge loan is a tool for buying fast and selling or refinancing within two years.
Rule of thumb: short hold, private money. Long hold, bank money.
How do I avoid a denial next time?
Line up a land lender before you sign the contract.
Get a written quote on the parcel before your inspection period ends. Put a financing contingency in the contract that matches your lender's timeline. And keep a private lender in your back pocket, even if you plan to use a bank. Read land loan requirements to see what lenders ask for.
Frequently Asked Questions
Why do banks deny land loans?
Raw land has no building and no income, so many banks will not lend on it or want large down payments, full income paperwork, and plans to build.
Can I get a land loan after a bank denial?
Often, yes. A private land lender like Damen Capital looks at the land value and your exit plan, closes in about 7 days, and needs no appraisal.
What if I do not have the down payment after a bank denial?
If you own other property with equity, cross collateral can fund up to 100% of the purchase. An equity partner can also put up the 20% down.