Which type of land loan is right for you?

By Jennifer Tucker
October 4, 2022 | 3 Min. Read

Whether you’re looking for a residential lot to build your dream home or recreational land for hunting, it’s important to understand which type of land loan is right for you. In most cases, this depends on how you plan to use the property.

Here are the three most common ways people plan to use land and the types of loans for each purpose:

Land Use: Build immediately

Some property buyers plan to build on their land immediately. In this case, you’re usually searching for a residential lot on improved land with access to roads and utilities.

Loan Types:

  • Improved Land Loan
  • Construction Loan

Land Use: Build later

Some property buyers have longer-term plans for the use of their land and intend to build later. In this case, you may be looking at land that is not yet ready for development, or land with improvements needed.

Loan Types:

  • Raw Land Loan
  • Unimproved Land Loan
  • Improved Land Loan

Speculative Investment

Some property buyers have no immediate plans for the use of the land and are buying with speculation that it will be a good investment. They might anticipate future development nearby that will increase the property’s value.  

Loan Types:

  • Raw Land Loan
  • Unimproved Land Loan

All About Land Loan

Raw Land Loan

Raw land is undeveloped with no existing utilities or access to roads. Raw land usually costs less than developed land, but raw land loans often have higher interest rates and require larger down payments. When you purchase raw land, your lender will require a detailed plan for land development.

Unimproved Land Loan

Unimproved land is more developed with some access to utilities and other features. Interest rates and down payment requirements for unimproved land loans are commonly higher than other types of loans. Your lender will most likely ask for a plan for land development or improvements.

Improved Land Loan

Improved land (or ready-to-build land) typically has built-in access to roads and utilities. It is the most developed type of land and is usually more expensive to purchase, but it often comes with lower loan interest rates and down payment requirements.

A land loan is sometimes confused with a construction loan. A construction loan is a short-term loan and is the right choice for people who plan to build on the land immediately.

Getting started on your path to ownership

After you’ve found the perfect property, the next step on your path to land ownership is finding the right lender. When you’ve found a lender you want to work with and are ready to apply for your loan, your next step is understanding the qualifications and requirements. Each type of land loan comes with its own requirements, but the general factors lenders take into consideration include:

  • Your credit score
  • Your debt-to-income ratio
  • How you intend to use the land
  • Fulfillment of property checks, like zoning, land-use restrictions, boundary surveys, and access to roads and utilities.

Getting a Land Loan with Marine Credit Union

Marine Credit Union can help you find the right land loan to reach your goals. Keep your loan in the community. Get in touch with a Marine Credit Union lender today.