How much down payment does a land loan require?
Land loans typically require 30 to 50 percent down on raw land, 25 to 35 percent on entitled land, and 20 to 30 percent on finished lots with utilities, from banks and private lenders. Seller financing can drop the down payment to 10 to 20 percent when the seller is willing to carry the note.
By land type
| Land type | Typical down payment | Why |
|---|---|---|
| Raw, unentitled | 30 to 50 percent | No income, uncertain use, slow to sell |
| Entitled for a project | 25 to 35 percent | The exit is visible |
| Finished lot with utilities | 20 to 30 percent | Close to a construction loan |
| Agricultural | 25 to 35 percent | Farm credit lenders; income from the land |
| Seller-financed, any type | 10 to 20 percent | The seller sets the terms |
Ranges vary by lender and market.
What pushes the down payment up
- No plan. Speculative holds get the highest down payments.
- Rural or remote. Fewer buyers if the lender has to sell.
- Environmental or access issues. Wetlands, easements, no road frontage.
- Large parcels. The loan size relative to the local market matters.
- Thin liquidity. Lenders lean on your cash when the land has none.
What brings it down
- Entitlements in hand. Approved zoning and a site plan.
- A construction lender already engaged. Some construction lenders fund the land purchase as the first draw at 65 to 75 percent of cost.
- A builder contract. A letter of intent from a builder to buy finished lots.
- Seller carry. The seller's note replaces part of your cash, if the senior lender allows it.
- Cross-collateral. Pledging equity in another property.
A worked example
$500,000 parcel, entitled for a fourplex:
- Bank land loan at 65 percent: $325,000 loan, $175,000 down.
- Seller carry of 20 percent behind a 60 percent bank loan: $300,000 bank, $100,000 seller note, $100,000 down. Only works if the bank allows the second.
- Construction lender funding land as phase one at 75 percent of total cost: the land goes into the project budget and your equity is measured on the whole project, often lower in cash terms.
Closing costs and carry
Add title, escrow, and lender fees of two to four percent, plus property taxes and any HOA or assessment during the hold. Land loans are often interest-only, so budget the carry until construction starts.
How CommFi handles it
Our lending desk prices the land loan and the construction loan together, which often lowers the cash required by folding the land into the project. It funds direct when it fits, and when a bank or land lender is the better source, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- Can I buy land with 10 percent down?
- Only with seller financing or a construction lender treating the land as phase one of the project. Banks and private lenders want 25 to 50 percent.
- Does entitled land need less down payment than raw land?
- Yes, typically 25 to 35 percent versus 30 to 50 percent, because the lender can see the exit.
- Can a seller carry part of the down payment on land?
- Often, if the senior lender allows secondary financing. Many land lenders do; most construction lenders want it paid off at the construction closing.
- Do land loans require reserves?
- Usually, enough to carry interest, taxes, and any assessments through the plan, often six to twelve months.
- Is the down payment lower if I already have a construction loan lined up?
- It can be. Some construction lenders fund the land at 65 to 75 percent of cost as the first draw, measuring equity on the whole project.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.