A lot of calls start the same way: "The bank turned me down for a land loan. Can you help?" Sometimes the answer is yes. Sometimes it is no, and the reason has nothing to do with credit or the land.
It comes down to one question: is this a business purpose loan, or will someone live on the land?
What is the difference between a business purpose and an owner occupied land loan?
A business purpose loan buys land as an investment through a company. An owner occupied loan buys land you or your family will live on.
| Business purpose | Owner occupied | |
|---|---|---|
| Who borrows | An LLC or corporation | You, personally |
| Why you are buying | To resell, split, hold, or rent | To build or place a home you will live in |
| Typical lenders | Private land lenders | Banks, credit unions, farm credit lenders |
| Consumer lending rules | Generally do not apply | Apply |
| Speed | Can close in about 7 days | Usually weeks |
Need to close fast?
$30K to $1M, 20% down, no appraisal, no points at closing, close in about 7 days. Written quote in 24 hours.
Get a Free QuoteApply NowWhy do private land lenders only make business purpose loans?
Federal consumer lending rules cover loans made mainly for personal use. Business purpose lenders are set up for investors, not homebuyers.
Truth in Lending covers consumer credit, not credit made mainly for business purposes (12 CFR 1026.3). Lenders who serve homebuyers are built to follow those rules. We are not. We lend to LLCs and corporations buying land as a business, and every borrower confirms that no one will live on the property. More on the rules in Dodd-Frank and seller financing land.
The bank said no. Should you try a private lender?
Yes, if you are buying land as an investment through a company. No, if you plan to live on it.
If the bank said no to an investment deal because it will not lend on raw land, wanted an appraisal you had no time for, or wanted 30% to 50% down, a private land lender is built for exactly that. We value land from sold comps, lend up to 65% of value with 20% down, and close in about 7 days. See private land lender vs. bank.
Do not call a home purchase a business deal to get a loan. You sign a certification that the loan is for business and no one will live on the land. If that is not true, the problem is yours.
Where do you go for a land loan if you plan to live on the land?
Local banks, credit unions, farm credit lenders, or the seller.
- Local banks and credit unions. Small local lenders often know the area and may lend on land they would not touch from far away.
- Farm credit lenders. Many lend on rural land and homesites.
- Construction loans. If you are building right away, some banks roll the land into a construction loan.
- Seller financing. Many land sellers will carry the note. Ask.
Terms vary a lot by lender and area, so shop at least two or three.
What counts as a business purpose for a land loan?
Buying land to resell, flip, subdivide, hold as an investment, or rent to someone else.
Flips, subdivides, cash out on land you own, land you will sell on owner financing, and land for a business like outdoor storage all count. What does not count: land you, a relative, or anyone in your family will live on. See land flip financing and land loan requirements.
Frequently Asked Questions
Can I get a private land loan to build my own home?
Not from Damen Capital. We make business purpose loans to LLCs and corporations only, and no one can live on the property. For a homesite, try a local bank, credit union, farm credit lender, or the seller.
What is a business purpose land loan?
A loan to a company buying land as an investment: to resell, flip, subdivide, hold, or rent to others. Consumer lending rules generally do not apply.
Why did the bank say no to my land loan?
Common reasons are that the bank does not lend on raw land, wants an appraisal and a large down payment, or the timeline is too short. For an investment deal, a private land lender may say yes.
Can I buy land in my LLC and live on it later?
Our loans are for business purposes only, and borrowers confirm that no one will live on the property. If you plan to live there, use a lender built for owner occupied loans.