If you are considering purchasing land, one of the first questions to understand is how financing works. Buying vacant land is very different from buying land with an existing home, especially when it comes to mortgage approval. Knowing these differences upfront can help you plan, budget, and avoid surprises.
Financing Vacant Land
Vacant land is considered higher risk by mortgage lenders because there is no livable structure securing the loan. As a result, financing is more restrictive.
What buyers should expect:
Higher down payment requirements
Typically 25%–50% down, depending on zoning, location, and servicing.Higher interest rates
Rates are usually higher than standard residential mortgages.Shorter amortization periods
Often capped between 15–25 years.Zoning and land use verification
Lenders need confirmation of how the land can legally be used.Access and servicing requirements
Legal road access and utilities matter.Appraisal based on land value only
Future build potential does not factor into the appraisal.Fewer lender options
Many major banks do not finance raw land, so buyers may need credit unions or alternative lenders.
In some cases, lenders may also ask about future building plans or timelines.
Financing Land With an Existing Home
When land includes a home that is livable and meets lender standards, financing is much more straightforward.
What buyers can expect:
Lower down payment options
As low as 5%–20%, depending on the buyer’s situation.Standard mortgage terms
Amortizations up to 30 years.Lower interest rates
Appraisal based on the home and land together
Traditional mortgage qualification
Income, credit, property taxes, and insurance apply as they would with any residential purchase.
Even if the buyer plans to renovate or redevelop later, having a livable home in place often allows access to better financing terms.
Buying Land to Build: An Important Note
If your plan is to buy land and then build, this typically involves:
Financing or purchasing the land first
Applying for a construction mortgage, which releases funds in stages during the build
Construction financing comes with additional requirements, including approved plans, contracts, and budgets.
The Bottom Line
Vacant land requires more cash upfront and comes with stricter lending rules.
Land with a home is easier to finance and offers more favorable mortgage terms.
Understanding these differences early helps buyers make confident, informed decisions.
If you are thinking about purchasing land or a property with redevelopment potential, speaking with a real estate professional early in the process can help you understand your options and avoid costly missteps.