Land Loan

A land loan, also known as a lot or raw land loan, is a type of financial loan that borrowers use to purchase a piece of land. This type of loan differs from a home loan or mortgage in that it is specifically designed for the purchase of a vacant piece of land where a home or commercial property is not yet built.

There are three main types of land loans:

Raw Land Loan: This type of loan is used to finance the purchase of completely undeveloped land (raw land) that has no utilities, roads, or services. Due to the higher risk associated with raw land loans, lenders often require a larger down payment and charge a higher interest rate compared to other types of land loans.

Lot Land Loan: This type of loan is used for land that is semi-developed. For example, the land might already have some utilities or roads in place. Lenders generally view lot land loans as less risky than raw land loans, so the terms might be more favorable.

Construction Loan: This type of loan is used when the borrower plans to build on the land immediately. It covers the cost of the land and the construction of the property. These loans are typically short-term and may require the borrower to refinance into a traditional mortgage once construction is complete.

Each of these types of land loans has its own requirements and specifications, and not all lenders offer them. Therefore, borrowers looking to finance a land purchase should thoroughly research their options to find the loan that best suits their needs.