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Lot & Land Financing

Acquire and develop land for your next construction project.

Types of Land Loans​

Raw Land Loans​

For undeveloped land with no improvements.

FeatureTypical Terms
LTV35-50%
Rate10-15%
Term1-5 years
UseLong-term hold, future development

Lot Loans​

For individual lots in developed subdivisions.

FeatureTypical Terms
LTV50-65%
Rate8-12%
Term1-3 years
UseNear-term construction

Land Development Loans​

For subdividing and improving raw land.

FeatureTypical Terms
LTC60-75%
Rate10-14%
Term18-36 months
UseSubdivision development

Land Loan vs. Construction Loan​

FeatureLand LoanConstruction Loan
PurposeAcquire landBuild on land
LTV35-65%65-85% (of completed value)
Term1-5 years12-24 months
DrawsSingle disbursementMultiple draws
ExitConstruction loan or saleSale or permanent loan

Strategy: Land Loan → Construction Loan​

  1. Acquire land with land loan (50-65% LTV)
  2. Entitle and permit using equity
  3. Roll into construction loan - land equity becomes your down payment
  4. Build and exit

Qualifying for Land Financing​

What Lenders Evaluate​

FactorWeightWhat They Want
Equity30%35-50% down payment
Plan25%Clear development/exit strategy
Location20%Buildable, accessible, utilities
Borrower15%Strong credit, liquidity
Zoning10%Appropriate for intended use

Borrower Requirements​

RequirementMinimum
Credit score680+
Down payment35-50%
Liquidity6 months of payments
ExperienceDevelopment track record helpful

Land Due Diligence​

Before purchasing land, verify:

Title & Survey​

  • Clear title with no liens
  • Boundary survey matches deed
  • Easements identified and acceptable
  • Access rights confirmed

Zoning & Entitlements​

  • Zoning allows intended use
  • Density/lot coverage acceptable
  • Setback requirements workable
  • Variances needed (or not)

Physical Conditions​

  • Soil/geotech report
  • Topography suitable for building
  • Flood zone status (FEMA)
  • Environmental (Phase I minimum)

Utilities​

  • Water availability (public or well)
  • Sewer (public or septic feasibility)
  • Electric service nearby
  • Gas (if needed)
  • Internet/communications

Development Costs​

  • Site work estimates
  • Utility connection fees
  • Impact fees
  • Road/infrastructure requirements

Land Development Process​

Phase 1: Acquisition (1-3 months)​

  1. Identify target parcel
  2. Negotiate purchase (option preferred)
  3. Complete due diligence
  4. Secure land loan
  5. Close on property

Phase 2: Entitlement (3-12 months)​

  1. Preliminary site plan
  2. Engineering and surveys
  3. Environmental approvals
  4. Subdivision plat
  5. Final approvals

Phase 3: Development (6-18 months)​

  1. Clear and grade
  2. Install roads
  3. Run utilities
  4. Individual lot surveys
  5. Record plat

Phase 4: Exit​

Option A: Sell developed lots to builders
Option B: Build homes on lots yourself
Option C: Combination (sell some, build some)

Lot Acquisition Strategies​

Strategy 1: Direct Purchase​

Buy lots outright from developers or individuals.

Pros: Full control, clear ownership
Cons: Capital intensive, inventory risk

Strategy 2: Options​

Pay for right to purchase within timeframe.

Pros: Low upfront cost, time to entitle
Cons: Option fees lost if you don't close

Strategy 3: Rolling Options​

Purchase lots as needed from developer.

Pros: Reduced inventory risk
Cons: Prices may increase

Strategy 4: Land Banking Partnerships​

Partner with land owner; they carry land, you develop.

Pros: Less capital required
Cons: Profit sharing

Financing Multiple Lots​

Blanket Land Loan​

Single loan covering multiple parcels.

FeatureDetails
Loan amountSum of lot values
Release pricePer-lot payoff amount
Partial releaseSell lots individually
Cross-collateralAll lots secure loan

Example:

  • 5 lots valued at $75K each = $375K total value
  • 60% LTV = $225K loan
  • Release price: $50K per lot (allows profit on each sale)

Lot Inventory Financing​

Line of credit for ongoing lot purchases.

Best for: Volume builders needing consistent lot supply

Costs to Budget​

Acquisition Costs​

ItemTypical Amount
Purchase priceMarket value
Closing costs2-3%
Due diligence$5K-$20K
Option fees (if applicable)1-5%

Entitlement Costs​

ItemTypical Amount
Engineering$10K-$50K
Architecture$5K-$25K
Surveys$2K-$10K
Legal$5K-$15K
Permits/fees$5K-$50K
Environmental$3K-$15K

Development Costs (if improving)​

ItemPer Lot Average
Clearing/grading$5K-$20K
Roads$10K-$30K
Utilities$10K-$30K
Stormwater$5K-$15K
Landscaping$2K-$10K

Carrying Costs​

ItemOngoing
Interest on loanMonthly
Property taxesAnnual
InsuranceAnnual
HOA/maintenanceIf applicable

Exit Strategies​

Sell to Builders​

  • Market to regional and national builders
  • Price competitively to move inventory
  • Offer bulk discounts for multiple lots

Build Spec Homes​

  • Maximize profit potential
  • Control entire project
  • More capital and risk

Sell to Investors​

  • Land investors seek future appreciation
  • Typically lower prices than builder sales
  • Quick exit if needed

Hold and Appreciate​

  • Long-term strategy
  • Interest-only payments may be required
  • Re-evaluate annually

Getting Lot Financing​

What to Submit​

  • Property information and location
  • Purchase contract or LOI
  • Development/exit plan
  • Due diligence completed
  • Your financial statement
  • Experience in land development

What You'll Receive​

  • Loan amount and LTV
  • Interest rate and term
  • Required down payment
  • Conditions to close

Get Lot Financing Quotes →