By Jennifer Tucker

October 6, 2022 | 9 Min. Read

A lot of people dream of staking claim to their own piece of land. The open space comes with all sorts of possibility, giving you the chance to build your dream home or create a recreational getaway. Whether you’re looking at a residential lot, land for hunting and fishing, or large acreage, it’s important to understand the steps on the path to ownership and the basics of buying land.

To help you on the way to fulfilling your dream, let’s look at the basics of buying land. Here, we outline six essential steps, from finding the right property to submitting your loan application.

There might be a vacant lot you drive past every day, or maybe you have a vision of wide-open space. Whether or not you have a specific property in mind, it’s important to start by doing your research. Instead of hitting the road hoping to find “for sale” signs, turn to online resources. Searching “land for sale near me” will turn up local listings that might include:

When you start your search, you should have criteria in mind. Think about:

Especially if you have plans to build a home on your new property, location matters. Do you want to be in a rural area or closer to the city? Are you searching for property in an area experiencing a development boon? Location is one of the biggest factors influencing the cost of land—and that’s important as you consider the price you’ll pay now and the value of your property in the future.

Your plan for land use comes into play early in your search and later when you’re looking for a loan. As you narrow your search, ensure the lots you’re looking at are zoned to meet your needs and have access to utilities and roads. Your lender will ask for these details to help determine the type of loan you need and the qualifications and terms.

Price is a factor in every purchase, and it pays to be prepared when you’re searching for land. A simple loan calculator can help you determine what you can afford by computing your monthly payments and total interest. Get started with a Debt-to-Income Calculator, a Down Payment Calculator, and a Loan Amount Calculator.

When considering the cost of land, you should also factor in the potential cost of land improvements. Generally, you’ll find listings for three types of land: raw, unimproved, and improved land (we take a closer look at each type in Step #3). Each requires varying degrees of time, effort, and money to reach your ultimate ownership goals.

For help sorting through the properties that match your search criteria, you may want to work with a real estate agent. Some real estate agents specialize in plots of land and are well-suited to help you navigate the search and sale process.

Once you’ve found a few properties with potential, you’ll want to take a closer look at each listing’s features. Before you buy, it’s important to dig into the details and understand requirements like zoning, access, and permitting.

Zoning laws are rules and regulations that control how property can be developed. The local planning department can offer insights about any restrictions related to how you can use the land you’ve set your sights on. Common restrictions for zoning include the type of business or building allowed, the size and height of buildings, or the location of utility lines.

Especially if you plan to build a home on the land, it will be important to know whether the lot has access to utilities like water, sewer, electricity, and cable hookups. Similarly, you’ll need to identify access to a public road.

If the land you plan to buy has limited access, it will be important to understand the permits you might need to obtain to make the lot ready-to-use. Permitting obligations can include sewer and septic systems, utilities like public water hookups and access to an electrical grid, and road access.

If you’re convinced you’ve landed on the perfect piece of property, now you’re ready to move forward. Next, you’ll need to find the right land loan and lender.

First, it’s important to identify the type of land loan you need. There are three common types of land loans:

Once you know which type of land loan best suits you, you’ll begin your search for the right lender. Lenders vary in the types of land loans they offer, and local banks and credit unions are more likely to offer land loans than large banks. They also may have more competitive rates and better terms due to their local knowledge and understanding of the area.

Once you’ve found a lender, it’s time to look at the requirements, rates, and terms you might encounter with your loan. The best lenders offer:

A large down payment can help reduce your monthly payments, but a low down payment requirement can get you on your way to ownership faster. At Marine Credit Union, you’re only required to put 10% down on your land to qualify for a loan.

The term of your land loan will affect how much you pay and how long you finance your property. Marine Credit Union offers financing of up to 30 years on land loans.

The interest rate of your land loan will determine how much you pay for your property in the long run. Look for low, competitive rates to help you achieve more manageable payments.

You’ve found the perfect plot of land, it has all the right features, and you’ve done your research on land loans and lenders. Now it’s time to make an offer!

Making an offer to purchase land can be intimidating. What if it’s rejected? Even more important, what if it’s accepted? Does that mean there’s no turning back? To protect your interests, it’s common for land loan offers to include several contingencies. Contingencies help protect you by ensuring that you can back out of the offer if anything worrisome turns up during the inspection period. Some common contingencies include:

When your offer is accepted, it’s time to move forward with your loan application. Like a traditional loan, your land loan application will be evaluated based on things like your credit score, debt-to-income ratio, and the amount of your down payment. You’ll also need to provide the lender with a land or boundary survey, your land use or development plan, and other appropriate paperwork.

Once the lender approves your application, you’ll agree to the loan terms, including the down payment amount, interest rate, and loan duration. Then you’re ready to sign on the dotted line and make your down payment.

Your down payment may not be the final check you write before taking ownership of your new property. As with other types of loans, you can expect to incur closing costs when you get a land loan. These out-of-pocket fees may include origination fees, stock fees, and fees for title work, survey, appraisal, and perc or environmental tests.

Once this work has been done and the loan is closed, you’re ready to take ownership of your new property where you can raise your family, raise your crops, or raise the dust with your ATV.

While ownership is a dream many people want to fulfill, buying and financing land comes with a unique set of considerations for borrowers. Before you decide to buy land, it’s important to weigh the pros and cons.

Buying land allows you to build a home to your exact specifications. In some areas, ready-to-build lots are also less expensive than purchasing a new home.

If you buy raw or unimproved land, you can hold on to the property until you’re ready to build. Owning land allows you the flexibility to build on and use the property as you want to.

Buying land can be riskier than buying a home, which is why it’s so important to be aware of zoning, access, and land use restrictions. Also, land doesn’t appreciate in value the same way as developed property.

Land loans often come with more stringent qualifications than traditional mortgages, as well as additional requirements like your land use or development plan and fulfillment of various property checks. Plus, not all lenders offer land loans or may not offer the type of land loan you need.

It’s up to you to weigh the costs and benefits of buying land and make the best decision for your financial goals.  

If you have your sights set on a piece of property you want to call your own, Marine Credit Union can help you find the right loan to reach your goals. Get in touch with a Marine Credit Union lender today.