A land loan down payment typically runs 20% to 50% of the purchase price, well above the 3% to 5% common on a conventional home mortgage.1Fannie Mae. What You Need To Know About Down Payments Where you fall in that range depends mostly on whether the parcel has utilities and road access, your credit profile, and what you plan to do with the land. A few government-backed programs and seller financing can drop the requirement much lower for buyers who qualify.
How Much Down by Land Type
Lenders sort land into two broad buckets, and which bucket your property falls into is the single biggest driver of your cash requirement.
Raw land has no utilities, no road access, and often no recent survey or soil testing. Because a lender can’t easily resell a remote, undeveloped parcel after a default, raw land carries the highest risk premium. Expect 30% to 50% down. Some lenders won’t finance raw land at all.
Improved land has been surveyed and connected to basic infrastructure: water, sewer or septic, electricity, and a paved road. Lenders see it as close to a buildable homesite, so down payments generally start around 20% to 30%.
A quick example shows the gap. On a $200,000 raw parcel at 40% down, you’d bring $80,000 to closing. That same $200,000 as an improved lot at 20% down needs $40,000. The difference is often enough to decide whether the purchase is feasible at all.
What Moves You Up or Down Within the Range
Credit Score
Your credit profile matters more here than on a home purchase, because there’s no house to soften the lender’s downside. Borrowers with FICO scores above 740 generally price closer to the floor of the range for their land type. Scores below 680 can push the requirement to 35% or higher. Land lenders have less room to be flexible on credit than home mortgage lenders, so cleaning up your report before applying pays off more on a land loan than on almost any other financing.
Intended Use
Land you plan to build a primary residence on is the easiest to finance. Lenders treat it as a stepping stone to a conventional mortgage, which lowers default risk. Land bought as a long-term hold or a speculative investment, with no construction timeline, usually needs 30% or more down.
Loan Term and Acreage
Land loans are shorter than home mortgages. Most run 5 to 15 years, and some lenders cap terms at 10 years for raw parcels. Shorter terms reduce the lender’s exposure and can sometimes translate to a slightly lower down payment. Larger tracts push the requirement the other way, especially once you cross the 40-to-50-acre mark, where fewer lenders participate and comparable sales get harder to find.
How the Appraisal Can Raise Your Cash Requirement
Lenders don’t calculate your loan on the price you agreed to pay. They calculate it on the lower of the purchase price or the appraised value.2Fannie Mae. Loan-to-Value (LTV) Ratios Buyers who negotiated a price above what an appraiser thinks the land is worth get blindsided by this.
Say you’re buying a 10-acre parcel for $150,000 and the lender wants 25% down. You planned to write a $37,500 check. The appraisal comes back at $120,000. The lender now caps your loan at 75% of $120,000, or $90,000. You need $60,000 to close, not $37,500. That $22,500 surprise kills deals regularly.
Land appraisals are especially volatile because comparable sales in rural areas are scarce. An appraiser may need to pull comps from a wide geographic area, and those comps can differ significantly in road access, timber value, or water features.3USDA Rural Development. Appraisal and Property Eligibility Training If you’re buying in a rural market, budget conservatively and keep extra cash on hand to cover a possible gap.
Programs That Lower the Down Payment
Not every land purchase runs through a conventional bank. Several programs cut the upfront cash requirement, each with its own eligibility limits.
Conventional Bank Loans
A standard land loan from a bank or credit union follows the ranges above: 20% to 50% down depending on land type and borrower. Banks are most conservative with raw acreage and most flexible with improved lots where the borrower has a signed construction contract. Interest rates on land loans currently run roughly 4% to 10%, with raw land at the higher end and improved lots closer to the lower end. Those rates run well above typical home mortgage rates, reflecting the added risk.
Construction-to-Permanent Loans
If you plan to build, a construction-to-permanent loan (also called a one-time close loan) wraps the land purchase, construction, and final mortgage into a single closing. FHA-backed one-time close loans require as little as 3.5% down for borrowers with credit scores of 620 or above, and conventional versions typically need 5% to 20%. For buyers with definite building plans, this is often the cheapest path to ownership.
USDA Farm Ownership Loans
The USDA Farm Service Agency offers Direct Farm Ownership loans that provide up to 100% financing for farmland, meaning no down payment on a standard direct loan.4Farm Service Agency. Farm Ownership Loans You must be an actual farmer or rancher, and the land must be used for agricultural purposes.
The FSA also runs a Down Payment Loan Program for beginning farmers, ranchers, and minority or women applicants. It requires just 5% down from the borrower. The FSA finances up to 45% of the purchase price (capped at the lesser of the purchase price, appraised value, or $667,000), and the balance comes from a commercial lender or the seller.4Farm Service Agency. Farm Ownership Loans To qualify as a beginning farmer, you cannot have operated a farm or ranch for more than 10 years, and you can’t already own more than 30% of your county’s average farm size.5Farm Service Agency. Beginning Farmers and Ranchers Loans
USDA Rural Development Loans
The USDA Section 502 Guaranteed Loan offers 100% financing with no money down, but it’s strictly for buying a dwelling in an eligible rural area.6Rural Development. Single Family Housing Guaranteed Loan Program You cannot use it to buy vacant land by itself. You can use it to purchase a site with a new or existing home, with no set acreage limit.
VA Construction Loans
Standard VA home loans cannot be used to buy vacant land. To use VA benefits toward a land purchase, you need a VA construction loan that bundles the lot cost and home construction into one transaction.7Veterans Benefits Administration. Circular 26-18-7 – Construction/Permanent Home Loans Eligible veterans and active-duty service members can put as little as 0% down. You’ll need a signed building contract and construction timeline before closing, the land must have utility access, and the finished home must meet VA minimum property requirements.
SBA 504 Loans
If you’re buying land for a business rather than a residence, the SBA 504/CDC loan program allows financing with as little as 10% down. The requirement rises to 15% if the business is less than two years old or the property is considered special-purpose, and to 20% if both apply. The land must be tied to a business use.
Seller Financing
When the owner acts as the lender, the down payment becomes a negotiation rather than a formula. Motivated sellers sometimes accept 10% to 15% down. The trade-off is usually a higher interest rate, a shorter repayment period, or a balloon payment coming due in five to seven years. Seller financing skips the bank’s underwriting entirely, so there’s no appraisal requirement and closings run faster. It’s common for rural or unusual parcels that banks find hard to underwrite. Have a real estate attorney review the promissory note and mortgage or deed of trust. One risk worth flagging: if the seller still carries a mortgage, their lender could trigger a due-on-sale clause.
Home Equity as a Funding Source
If you already own a home with significant equity, a home equity line of credit can fund part or all of a land purchase. HELOC rates are typically lower than land loan rates because your house secures the debt. The risk is real: you’re putting your primary residence on the line for a piece of vacant property. This approach makes the most sense when you’re buying a modest lot and hold substantial equity relative to the draw.
Cash You’ll Need Beyond the Down Payment
The down payment is the largest upfront cost but not the only one. Budget for closing costs of roughly 2% to 5% of the loan amount, covering origination fees, title search, recording fees, and attorney costs. Land transactions also carry expenses that home purchases don’t.
- Boundary survey. A professional survey on a parcel of several acres typically costs $1,500 to $2,800 or more, depending on terrain and tree cover. Most lenders require a current survey before closing.
- Title insurance. Protects you and the lender against ownership disputes, liens, or easements missed by the title search. Premiums vary by state and purchase price.
- Environmental site assessment. For vacant or previously commercial land, lenders often require a Phase I Environmental Site Assessment to confirm the property isn’t contaminated.
- Percolation test. If the land lacks municipal sewer access, a perc test determines whether soil supports a septic system. Costs typically run $1,000 to $1,300, though they can range from $250 to $3,500 depending on local health department requirements.
- Appraisal. Land appraisals tend to cost more than home appraisals because the appraiser may need to research a wider area for comps.
These add up quickly. On a $150,000 land purchase with 30% down, you’d bring $45,000 for the down payment, plus potentially $5,000 to $10,000 for surveys, tests, title work, and closing costs.
Getting Your Down Payment Money Ready
Lenders don’t just want to see the money. They want to see you’ve had it for a while. Funds sitting in your account for at least 60 days before you apply are generally considered seasoned and won’t require additional documentation about their source. Money deposited more recently triggers questions and paperwork.
Standard acceptable sources include checking and savings accounts, money market accounts, and proceeds from selling stocks, bonds, or other assets. If you recently liquidated an investment or took a retirement distribution, keep the paperwork showing where the money came from and when it hit your account.
Gift funds from a family member work, but the lender will require a signed gift letter confirming the money is a genuine gift with no repayment obligation, and typically the donor’s bank statements as well.8Experian. What Is a Gift Letter for a Mortgage
Expect the lender to ask for your two most recent monthly bank statements for every account funding the purchase. Statements must show your name, account number, and a balance covering the down payment and closing costs. Large deposits during that window that aren’t regular income will need a paper trail. Move your down payment into position at least 60 to 90 days before applying to avoid delays.