How To Get A Loan To Purchase Land

Feb 18, 2025

12-minute read

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A countryside home, showcasing a rural residence with natural surroundings.

If you’re wondering how to get a loan for land, wonder no more. We have all the information you need. That said, it also helps to note that the process of securing loans for land purchases differs significantly from obtaining other forms of real estate financing.

Before diving in, though, it’s important to be aware upfront that there are unique costs associated with building a house on land from scratch and that electing to do so can be expensive. Home buyers who choose this route should expect to pay for several contractors, permits, and materials. One of the largest investments that they’ll make is acquiring a plot of ground on which to situate their property – which is where a loan for land purchases comes in.

On top of it, unless home buyers have a significant amount of money put aside, those seeking to go this route will have to apply for a land loan as well. That’s an important distinction to be aware of, noting that the loan which you’ll use for the purchase is separate from the form of financing used to build the physical house itself – and that the process of obtaining it is different from getting a mortgage. Even though Rocket Mortgage® doesn’t offer these types of loans, we want to help you before you start your home building journey. Here’s what you should know.

What Is A Land Loan?

In simple terms, a land loan – which you may sometimes hear referred to as a lot loan – is used to finance the purchase of a plot of land. As a prospective property owner, you can choose to take out a land loan if you’re interested in buying a piece of land upon which to build a home or that you intend to use for business purposes. That said, the type of loan that you elect to take out will depend on where you’re buying the ground and how you intend to use it.

For those curious how to get a loan for land, and if applying for one even makes sense, be advised: Land or lot loans are often great choices for people who aren’t ready to build or finance the physical house, but know they want to live in a specific area. For example, using the financing method, a person who is 10 years away from retirement can purchase land in another state, then begin building the house 5 years later. In effect, a land loan provides a great way to secure the plot of earth that you want to reside on, then build a house at your leisure, versus shopping for a prebuilt home.

Construction Loans Vs. Land Loans

Note that a construction loan is another type of loan that you can utilize if you’re seeking to finance building a new house. However, construction loans won’t cover the costs associated with buying land.  And the terms associated with the financing products are shorter than those associated with land loans as well. Borrowers who choose to seek out and secure construction loans tend to be prospective homebuilders with projects that start once the financing has been obtained.

All of which is to say that you’ll need at least two loans if you’re planning on building a new house for yourself or prospective tenants: Both a land loan and a construction loan. The land loan effectively covers the purchase of the land itself while the construction loan is designed to cover the cost of building infrastructure.

While the prospect of securing two loan financing options (let alone from different lenders) may seem financially daunting at first, don’t forget. You also have the option of purchasing a new construction house with a mortgage attached. Yet another potential avenue you might explore is refinancing the construction loan with a mortgage loan once the construction of the property is complet