Land Loan

What Is a Land Loan?

A land loan helps you buy a piece of land before you are ready to build on it. Instead of paying for a finished house, you are financing the land itself, which gives you a way to claim the right lot now and build a home on it down the road. Our team at JVM Lending offers this as a 10-year loan for investment property, meaning land you plan to build on rather than a home you will live in yourself.

It works best for empty, buildable land. The lot needs to be a good fit for a future home, and it cannot have a house or other structure on it that adds value. Because there is no deadline to start building, you can lock in the land at today’s price and break ground whenever the timing feels right.

A land loan is its own kind of financing, separate from a construction loan or a regular mortgage. A construction loan pays for the building itself, and a mortgage is tied to a home that already exists, but here the land is what backs the loan. You make the same monthly payment for 10 years, and when you are ready to build, you can refinance into new financing with no penalty for paying this one off early.

Key Benefits

Buy the land now, build later

Good lots tend to move quickly, so this loan lets you act as soon as you find the right one. There is no deadline to start building, which means the parcel is yours to hold until your plans and budget line up. When the time comes, you can build anything from a single home to a four-unit property.

One steady payment for 10 years

Your payment is fixed for the full 10 years, so you always know exactly what you owe each month with no surprises along the way. There is also no penalty for paying the loan off early, which gives you room to refinance into new financing once you start building.

A bigger down payment means less cash set aside

Lenders often ask you to keep a little money set aside as a safety net, and with this loan that amount depends on your down payment. The more you put down, the less you need to keep on hand. Put down half or more and you may not need any at all, while the minimum 20% down calls for about six months of payments in savings.

Available within select states

You can use this loan if the land is located within AZ, CA, FL, GA, ID, IL, LA, MA, OR, TN or TX, whether you are buying a new lot or refinancing one you already own. Loan amounts run from $50,000 to $500,000, which is enough to cover most residential lots.

Program Details at a Glance

Here is a quick look at the main terms, all of which the lender confirms during approval and appraisal.

Things to Know Before You Apply

Empty, buildable land only.

The lot has to suit a future home of one to four units and stay within 20 acres. It cannot already have a structure that adds value, and a few land types are off the table, including landlocked lots, leased land, and commercial or industrial property.

For investing, not for living.

This loan is meant for land you plan to build on as an investment, so a primary home or a vacation property will not qualify.

Some land costs a little more to finance.

Land that is zoned for homes gets the best pricing, but other types, such as farmland or recreational land, can still work with a slightly higher rate. Keep in mind that any income tied to the land cannot be used to help you qualify.

Land loan rates are higher than home loan rates.

Because there is no finished house backing the loan yet, the rate sits a bit above a standard mortgage. A higher rate is not necessarily a bad thing, especially when the monthly payment fits comfortably into your plans, and many borrowers refinance into a lower-rate loan once they start to build.

A few rules to keep in mind.

You will pay your property taxes through the loan, an arrangement called escrow, and that part is required. A couple of setups are not allowed, such as power of attorney or certain trusts, and on empty land you generally will not need home or flood insurance.

Who Is This Loan Best For?

• People who found the right lot and want to lock it in before someone else does
• Anyone planning a one to four unit build who is not ready to break ground yet
• Owners who already hold a lot and want to refinance it
• Buyers with at least 20% to put down and a 680 or higher credit score

Alternatives to a Land Loan

Construction loan: If you are ready to build right away, a construction loan covers the building itself rather than just the land, and it can roll into a regular mortgage once the home is finished.

Cash-out refinance: If you already own a home, a cash-out refinance lets you borrow against the value you have built up in it and put that money toward the land, often at a lower rate than a land loan.

Home equity loan or line of credit: You can also tap that same built-up value through a home equity loan or line of credit, which lets you fund the purchase while keeping your current mortgage in place.

Land Loan FAQs

What is a land loan and how does it work?

A land loan allows you to purchase an empty, buildable lot before you are ready to construct a home on it. Rather than financing a finished property, the land itself backs the loan. JVM Lending offers this as a 10-year fixed loan for investment land, meaning land you plan to build on rather than a primary residence. There is no deadline to start building, and there is no early payoff penalty, so you can refinance into a construction or permanent loan whenever you are ready.

What are the requirements to qualify for a land loan?

To qualify, borrowers need a minimum down payment of 20%, a credit score of 680 or higher, and a debt-to-income ratio of no more than 43%. The property must be an empty residential lot of 20 acres or less that is suitable for a future one to four-unit home. Landlocked lots, leased land, and commercial or industrial property are not eligible. Loan amounts range from $50,000 to $500,000. You can use this loan if the land is located within AZ, CA, FL, GA, ID, IL, LA, MA, OR, TN, or TX.

Are land loan interest rates higher than standard mortgage rates?

Yes. Because there is no finished home backing the loan, land loan rates are higher than a typical mortgage rate. However, a higher rate is not necessarily a deal breaker, especially if the monthly payment fits comfortably within your budget. Many borrowers plan to refinance into a lower-rate construction or permanent loan once they are ready to build, which can reduce their long-term borrowing costs.

How is a land loan different from a construction loan?

A land loan finances the purchase of raw, buildable land, with no obligation to begin construction on a specific timeline. A construction loan, on the other hand, covers the cost of building a home and is used when you are ready to break ground right away. Once construction is complete, a construction loan typically converts or refinances into a regular mortgage. A land loan is the right tool when you want to secure a lot now and build later on your own schedule.

Is a Land Loan Right for You?

A land loan makes the most sense when you have found a lot worth securing now and plan to build a home on it down the road. With 20% to put down, a credit score of 680 or higher, and a buildable lot, you can claim the land and build on your own timeline.

The best way to find out if you qualify is to talk with one of our mortgage experts at JVM Lending. Contact us today at (855) 855-4491 or hello@jvmlending.com for a free consultation.