Land loans typically require 20 to 50 percent down, depending on the lender and what you plan to do with the land

A land loan is not the same as a mortgage on a house. Lenders see raw land as riskier because there is no structure to repossess and sell if you stop paying. That risk is why down payments are steeper than they are for home purchases. Most lenders want between 20 and 50 percent of the purchase price upfront. Some agricultural lenders or government-backed programs may accept lower amounts, but 30 percent is a reasonable middle estimate if you are shopping around.

The exact amount depends on three things: whether the land is raw or has utilities, whether you have a building plan, and your credit score. A lender is more willing to accept 20 percent down if the land already has road access, water, and electric service. If you are buying raw acreage with no improvements and no immediate construction plan, expect to put down 40 to 50 percent. A strong credit score (typically 700 or higher) can sometimes lower the percentage; a weaker one will raise it.

Key Takeaways

  • Most land loans require 20 to 50 percent down, with 30 percent as a common middle ground across conventional lenders.
  • Raw land with no utilities or building plan usually requires a larger down payment than land with existing infrastructure.
  • Your credit score, income, and debt-to-income ratio affect both the down payment amount and whether a lender will approve you at all.
  • Agricultural lenders, credit unions, and some state programs may have different down payment rules than conventional banks.
  • The down payment is separate from closing costs, which typically run 2 to 5 percent of the purchase price on land loans.

How lenders calculate the down payment they will accept

Lenders use the loan-to-value ratio (LTV) to decide how much you must put down. If a lender offers an 80 percent LTV, that means they will lend you 80 percent of the land's appraised value, and you must cover the remaining 20 percent. A 70 percent LTV means you pay 30 percent down. Land loans often max out at 70 to 80 percent LTV, whereas home mortgages commonly go to 95 or 97 percent LTV.

The appraised value matters because it is not always the purchase price. If you negotiate a deal for $100,000 but the appraisal comes back at $90,000, the lender calculates the down payment based on $90,000. This can mean you need more cash than you expected. Always ask the lender upfront what LTV they offer for the type of land you are buying.

Down payment differences between raw land and improved land

Raw land — no roads, utilities, or structures — usually requires 40 to 50 percent down. Lenders see it as speculative. You may be buying it to hold, to develop later, or to subdivide, and none of those outcomes are may provide. The lender has no collateral to recover quickly if the deal goes wrong.

Improved land — with road access, electric, water, and sewer — may only require 20 to 30 percent down. The infrastructure already exists, so development is faster and the risk is lower. If you have a signed contract with a builder or a detailed site plan, some lenders will go even lower.

Land with a construction loan is a different product entirely. If you are financing both the land and the house build together, the down payment is typically 20 to 25 percent of the total project cost (land plus construction). The lender treats it as a single loan with a clear end product, which reduces their risk.

Credit score and income requirements that affect your down payment

Your credit score influences not just whether you get approved, but how much down payment the lender will demand. A score above 740 may may have access to you for a 20 percent down payment on improved land. A score between 680 and 720 might require 30 to 40 percent. Below 680, many conventional lenders will not touch the loan, or will demand 50 percent down and charge a higher interest rate.

Income and debt-to-income ratio matter equally. Lenders want to see that your total monthly debt payments (including the new land loan) do not exceed 43 to 50 percent of your gross monthly income. If you are self-employed or have irregular income, lenders often ask for two years of tax returns and may require a larger down payment to offset the income uncertainty. A co-signer with stronger credit or income can sometimes lower the down payment requirement.

Where to find lenders who accept lower down payments

Agricultural lenders and Farm Credit — if the land is for farming, ranching, or timber, the Farm Credit System (a network of lenders chartered by Congress) may accept 10 to 20 percent down. They understand agricultural land and its long-term value differently than conventional banks do. Contact your local Farm Credit office to ask about their current terms.

Credit unions — some credit unions offer land loans with 15 to 25 percent down if you are a member. They often have more flexibility than banks and may consider factors beyond just credit score. Call your credit union and ask whether they do land loans and what their minimum down payment is.

State and regional programs — a few states offer down payment assistance or lower-LTV land loans for first-time buyers or rural development. These vary widely by state and are often tied to specific uses (agricultural, conservation, rural residence). Search "[your state] land loan programs" or contact your state's department of agriculture or rural development to learn what exists in your area.

Portfolio lenders — some smaller banks keep loans on their own books instead of selling them to investors. They have more freedom to set their own rules and may accept 15 to 25 percent down on land they believe in. These lenders are harder to find but worth calling if you have been turned down elsewhere.

What happens if you cannot save the full down payment

If you are short on cash, a few paths exist. You can ask the seller to carry back a second mortgage — the seller finances part of the purchase price directly, and you pay them over time. This is common in land deals and can reduce the down payment you need from the bank. For example, the seller might finance 10 percent, the bank finances 70 percent, and you put down 20 percent.

You can also delay the purchase until you save more. Land prices do not always rise, and waiting six months to a year to accumulate a larger down payment can save you thousands in interest over the life of the loan. A smaller loan amount means lower monthly payments and less total interest paid.

Borrowing the down payment from family is another option, though lenders will ask whether it is a gift or a loan. If it is a loan, you must disclose it and it counts toward your debt-to-income ratio. If it is a gift, get a signed letter from the family member stating it does not need to be repaid.

Down payment versus closing costs on land loans

Do not confuse the down payment with closing costs. The down payment is what you put toward the purchase price. Closing costs are the fees for the loan itself — appraisal, title search, survey, lender fees, title insurance, and recording fees. On land loans, closing costs typically run 2 to 5 percent of the purchase price, sometimes higher if a survey is required.

If you are buying $100,000 of land with 30 percent down, you need $30,000 for the down payment plus another $2,000 to $5,000 for closing costs. Ask the lender for a Loan Estimate within three days of applying; it will itemize all the closing costs so you know the total cash you need to bring to closing.

Frequently Asked Questions

Can I put down less than 20 percent on a land loan?

Some lenders will accept 10 to 15 percent down, but they are uncommon and usually charge higher interest rates. Agricultural lenders and credit unions are more likely to offer lower down payments than conventional banks. You will need strong credit and income to may have access to.

What if the land appraises for less than the purchase price?

The lender calculates the down payment based on the lower appraised value, not the price you agreed to pay. If you agreed to $100,000 but it appraises at $85,000, you either need to put down more cash or renegotiate the price with the seller. Some sellers will lower the price; others will not.

Do I need a down payment if I am using a construction loan?

Yes, but it is typically 20 to 25 percent of the total project cost (land plus building), not 30 to 50 percent of the land alone. Construction loans are treated as a single product with a defined end, so lenders accept lower down payments than they do for raw land purchases.

Will a larger down payment lower my interest rate?

Usually yes. A larger down payment means lower risk for the lender, so they often offer a lower interest rate. The difference is typically 0.25 to 0.5 percent, which adds up significantly over a 15 or 20-year loan. Ask the lender for rate quotes at different down payment levels to see the trade-off.

Can I use a gift for the down payment?

Yes, but the lender will ask for a signed gift letter from the person giving you the money, stating it does not need to be repaid. The gift does not count toward your debt-to-income ratio, which can help you may have access to. If it is a loan from family, you must disclose it and it will count as debt.