Getting a loan for raw land is one of the harder things to do in real estate finance. Banks see raw land as one of the riskiest asset classes they can lend against. Unlike a house or commercial building, vacant undeveloped land generates no income, has limited immediate resale value in the eyes of lenders, and often has significant unknowns around utilities, access, and zoning. Because of that risk, raw land loan requirements are much stricter than for improved properties.
This guide explains exactly what banks and other lenders want to see when you apply for a raw land loan, what realistic loan terms look like, and what alternatives exist when you cannot qualify.
What Is a Raw Land Loan?
A raw land loan is a type of real estate loan used to purchase undeveloped, unimproved land. Raw land typically has no utilities, no roads, no structures, and may have no approved use plan. It is the most basic form of land purchase.
Lenders distinguish between several types of land when evaluating loan applications:
Raw land: Completely undeveloped, no utilities, no access road, no development plans. Highest risk for lenders.
Unimproved land: May have some basic utilities nearby or road access but is otherwise undeveloped. Slightly less risky than raw land.
Improved land: Has utilities, road access, and may have a site plan or permit in place. Most lenders prefer this category.
Improved land is easier to finance. If you are buying raw land, expect tighter requirements and higher rates.
Typical Raw Land Loan Requirements
Requirements vary by lender, but most banks and credit unions that will lend on raw land look for the following:
Down payment: Most lenders require 20% to 50% down on raw land. A 30% to 35% down payment is the most common requirement. Community banks tend to be more flexible than national banks.
Credit score: Most lenders want a minimum FICO score of 680 to 720 for raw land loans. Some may approve scores in the 640 to 680 range with additional compensating factors, such as a larger down payment or strong income.
Debt-to-income ratio (DTI): Lenders typically want your total monthly debt obligations, including the new land payment, to not exceed 43% to 45% of your gross monthly income.
Development plan: Many lenders require a clear, detailed plan for what you intend to do with the land. If you plan to build a home, they want timelines. If it is an investment, they want to understand the exit strategy.
Land appraisal: An appraisal is almost always required. Unlike residential appraisals, land appraisals can be expensive (typically $1,500 to $3,500) and take longer to complete. The appraiser looks for comparable sales in the area to establish value.
Environmental assessment: Some lenders require a Phase I Environmental Site Assessment, particularly for larger parcels or land near industrial areas. This checks for contamination or environmental liabilities. Cost is typically $1,500 to $3,500.
Survey: A current survey of the property is often required, confirming boundaries and access. Survey costs range from $500 to several thousand dollars depending on acreage and complexity.
Proof of income: Two years of tax returns and recent pay stubs or bank statements. Self-employed borrowers should expect additional scrutiny and may need 2 to 3 years of returns.
Where to Get Raw Land Loans
Not every lender offers raw land loans. Here is where to look:
Community banks and credit unions: These are your best bet for traditional land financing. Local lenders understand local markets and are more willing to make judgment calls than national banks with rigid automated underwriting. Call your local bank or credit union first.
Farm Credit System lenders: If you are buying agricultural land or land in a rural area, Farm Credit institutions specialize in rural land financing. They typically have more favorable terms for land than conventional banks.
USDA programs: The USDA Farm Service Agency offers direct loans for beginning farmers and ranchers. These programs have down payment requirements as low as 5% for qualifying borrowers.
Seller financing: As discussed elsewhere, many land sellers are willing to act as the lender. This avoids the bank entirely and often has fewer qualification requirements.
Hard money lenders: Private lenders who focus on real estate will often fund raw land deals, but expect interest rates of 10% to 15% and short terms of 6 to 24 months. These are bridge solutions, not long-term holds.
Land equity funding companies: Serious Land Capital is a land equity funding company that purchases land alongside investors without requiring a bank loan. This is not a loan at all. SLC covers the purchase price and closing costs and takes title. The investor brings the deal and may manage the sale. After the land sells, profits are split, typically 50/50 to 70/30. There are no monthly payments, no down payment requirement, and no credit check. This works best for investors who find deals but lack the capital to close.
What Banks Do Not Want to See
Understanding what disqualifies a raw land loan application is just as important as knowing what lenders want.
Speculative intent: If you tell a lender you are buying land because “the market is going up,” that is a red flag. Lenders want a concrete plan, not speculation.
No road access: Landlocked parcels or land with easement disputes are very difficult to finance. Lenders want to know the property can be accessed legally.
Environmental issues: Any indication of contamination, wetlands restrictions, or other environmental problems will either kill the deal or require expensive remediation evidence.
Inability to explain the exit: How will you pay off this loan? If you cannot answer that question clearly, expect a denial.
Poor comparables: If there are few or no similar land sales in the area, an appraisal may come in lower than expected. This can result in a loan offer for less than the purchase price.
Realistic Raw Land Loan Terms
When you do qualify, here is what to expect:
Loan-to-value (LTV): Most lenders cap at 65% to 75% LTV on raw land. Some go to 80% on improved land with a plan.
Interest rates: Raw land loan rates typically run 1% to 3% higher than standard mortgage rates. In a market where home mortgages are around 7%, expect raw land rates of 8% to 10%.
Loan term: Most raw land loans are short-term, 3 to 10 years. You are not getting a 30-year mortgage on raw land. Expect a balloon payment at the end.
Origination fees: Expect 1% to 2% of the loan amount in origination fees, plus appraisal, environmental assessment, and survey costs. Budget for $5,000 to $10,000 in total closing costs on a $100,000 land purchase.
Anticipated Follow-Up Questions
Can I use an FHA or VA loan to buy raw land?
No. FHA and VA loans are for primary residences, not vacant land. You cannot use these programs to purchase raw land alone. Some programs allow you to finance land and construction together in a construction-to-permanent loan, but the land component still requires meeting specific requirements.
Do I need a survey before applying for a raw land loan?
Most lenders will require a survey before closing, if not before approval. Even if not required, a current survey is highly advisable so you know exactly what you are buying and so the lender can confirm the parcel boundaries match the legal description in the deed.
How long does it take to get a raw land loan approved?
Expect 30 to 60 days minimum. The appraisal alone can take 2 to 4 weeks. If an environmental assessment is required, add another 2 to 3 weeks. Budget time accordingly if you are competing with a cash buyer.
What if my credit score is under 640?
Traditional bank land loans will be very difficult to obtain with a credit score under 640. Your best alternatives are seller financing (where the seller sets their own criteria), hard money lending, or working with a land equity funding company like Serious Land Capital where there is no credit check because it is an equity partnership, not a loan.
What to Do Next
If you want to pursue a traditional bank loan for raw land, start by contacting local community banks and Farm Credit lenders in your area. Get pre-qualified before you make an offer. Have your development plan documented before applying. If traditional financing is not available for your situation, explore seller financing or equity funding alternatives at Land Funding Partners, which aggregates options across the US.
