How to Finance a Land Purchase: Every Option Explained

Figuring out how to finance land is one of the biggest challenges for buyers and investors. Unlike houses, raw land doesn't have a straightforward mortgage process. Most banks don't want to lend on vacant acreage. The ones that do move slowly and have rigid requirements that disqualify most deals.

The good news is that there are several ways to get a land purchase loan — you just need to understand the trade-offs. This guide covers every major option for financing raw land, from traditional banks to private land lenders to creative structures that most investors don't know about.

Why Financing Land Is Harder Than Financing a House

Banks view raw land as high-risk collateral. There's no building generating income, no tenant paying rent, and if the borrower defaults, the bank is stuck with a vacant lot that's harder to sell than a house. That's why conventional mortgage programs from Fannie Mae and Freddie Mac don't apply to undeveloped land.

This creates a financing gap. Millions of acres of raw land change hands every year, but the traditional lending infrastructure that exists for homes simply doesn't exist for land. Buyers are left to find alternative options — and most don't know where to start.

Option 1: Local Banks and Credit Unions

Some community banks and credit unions offer rural land loans, particularly in areas where land sales are common. These tend to have the lowest interest rates — typically 7-10% — but they come with significant trade-offs.

Bank land loans usually require 30-50% down, a strong credit score (700+), full income documentation, an appraisal, and an environmental review. The approval process takes 30-60 days at minimum, and many applications get denied because the property doesn't fit the bank's lending criteria — too remote, too large, no road access, or simply "not a property type we're comfortable with."

If you have time, excellent credit, and a property the bank will accept, this can be the cheapest option. But for active land investors who need to close quickly or who buy properties that banks won't touch, it's often not realistic.

Option 2: USDA Rural Land Loans

The USDA offers loans for rural properties through its Farm Service Agency (FSA). These are designed for agricultural land purchases and have favorable terms — lower rates and longer terms than most commercial options. However, they're limited to properties that qualify as farmland, require a farming plan, and the application process can take months.

For investors buying raw land for resale, subdivision, or non-agricultural purposes, USDA loans generally aren't available.

Option 3: SBA Loans

SBA 504 loans can be used for land purchases tied to business use — but the land must be for an owner-occupied commercial building. If you're buying raw land to develop a business facility, this may work. For land investors buying acreage to flip or subdivide, SBA loans don't apply.

Option 4: Home Equity (HELOC)

If you own a home with equity, a Home Equity Line of Credit can be used to purchase land. The rate is typically lower than a land loan because the HELOC is secured by your home, not the land. This is a viable option for smaller land purchases where you want to avoid the complexity of a land-specific loan.

The risk is obvious: you're putting your home on the line. If the land deal doesn't work out and you can't repay the HELOC, your primary residence is at risk. For experienced investors who understand the trade-off, it's a tool worth considering. For first-time land buyers, it's usually not the right move.

Option 5: Private Land Lenders

A private land lender is a non-bank company that makes loans specifically for raw land and vacant acreage. This is where most active land investors end up, because private lenders solve the two biggest problems with bank financing: speed and flexibility.

A private land loan typically closes in 7-14 days instead of 30-60. Approvals happen in 24-48 hours. There's no committee, no appraisal in most cases, and the decision is made by someone who actually understands raw land — not a residential mortgage underwriter trying to fit a square peg into a round hole.

The trade-off is rate. Private land loans run 12-16% interest compared to 7-10% at a bank. But for investors who are buying, improving, and reselling land within 6-12 months, the higher rate is a small cost relative to the certainty of closing and the speed of execution.

Option 6: Seller Financing

Seller financing — also called owner financing — is one of the most common ways to buy vacant land. Instead of getting a loan from a bank or private lender, the seller acts as the lender. The buyer makes a down payment, signs a promissory note, and makes monthly payments directly to the seller.

For buyers, this is often the easiest path to financing raw land. There's no bank application, no credit committee, and the terms are negotiable directly with the seller. Down payments are typically 10-25%, and interest rates usually range from 8-12%.

For sellers, offering owner financing can sell a property 2-3x faster and often at a higher price than cash-only sales. And the seller doesn't have to hold the note long-term — a note buyer like Damen Capital can purchase the promissory note at closing, turning the deal into a cash sale for the seller.

Our seller financing guide and free 14-module course cover this strategy in detail.

Option 7: Cross-Collateralization

If you already own land or other real estate, you may be able to finance a new land purchase with zero money down using cross-collateralization. This means pledging equity in a property you already own as additional security for the new loan.

For example, if you own a free-and-clear 10-acre parcel worth $80,000 and you want to buy a new $60,000 parcel, a lender can use both properties as collateral and fund the entire purchase — no down payment required.

This is a powerful strategy for land investors building a portfolio. Instead of tying up cash in down payments on every deal, you leverage existing equity to keep your capital working. Learn how cross-collateral land financing works →

Option 8: Wraparound Mortgages

A wraparound mortgage is an advanced seller financing structure where the buyer's new loan "wraps around" an existing loan on the property. The buyer makes payments to the seller, and the seller continues making payments on the underlying loan. The seller profits from the spread between the two interest rates.

This can work when a seller has an existing mortgage they can't pay off at closing. It's more complex and carries additional risk, so it's typically used by experienced investors. Our complete guide to wraparound mortgages explains the structure in detail.

Comparison: Every Land Financing Option at a Glance

Which Option Is Right for Your Deal?

The right way to finance land depends on three things: how fast you need to close, how long you plan to hold, and what kind of property you're buying.

If you're an active investor flipping or subdividing — a private land lender gives you the speed and certainty to win competitive deals. The higher rate is a cost of doing business that pays for itself in deal volume and execution speed.

If you're buying land to hold long-term — a bank or credit union loan saves you money over a multi-year hold, assuming you qualify and can wait for the approval process.

If you're selling land — offering seller financing expands your buyer pool dramatically and can sell your property faster at a higher price. Sell the note at closing and you still get cash.

If you already own land — cross-collateralization lets you buy more land without tying up cash, which accelerates portfolio growth.

Next Steps

• See our raw land loan program and terms →
• Learn about zero-down cross-collateral financing →
• Explore seller financing for land →
• Use our free land loan calculator to estimate costs →
• Compare: Private lender vs. bank for land →