Land Loans, Quickly Explained

Let’s look at what land loans are and how they work.

A land loan – sometimes called a lot loan – is a loan that is used to finance the purchase of a plot of land.

The three most common types of land loans are raw land loans, unimproved land loans, and improved land loans.

Financing the purchase of land is different than taking out a loan for an existing home.

Land loans can be used for various purposes, such as for building a home in the future, or for agricultural use.

A traditional mortgage, which is used to buy a home, is secured by the value of the home as collateral.

A land loan is more complex, with the loan being secured by the value of the land as collateral.

Land loans are considered more risky than other types of loans because there is typically no improvement on the land at the time the loan is made, and no home to act as collateral.

Because of this, lenders often charge higher interest rates and require larger down payments.

A land loan, as the name indicates, is for a piece of land only. If you want to buy land and start building right away, you should consider getting a construction loan.