Purchasing land has become a popular investment strategy due to a surge in real estate prices. Before purchasing land, there are various things you ought to know to ensure it fits your budget and needs. Below is a list of three things to consider before buying land.

The Designated Use of Land

Lenders tend to minimize their risk when purchasing land, as developing it is risky. The selected lender assesses the risk to your land loan depending on how you want to grow your land.

Upgrades Needed

A piece of land may not be ready for development. You may discover this after acquiring the land or at the time of the purchase. In either case, purchasing such land is risky as further uncertainties cause further complications for asset development or escalating prices.

Construct Immediately

The terms of a land loan, including the interest rate and down payment, can hinge on the intended land use as they are directly linked to the bank’s risk exposure. Securing a land loan and building property has fewer risks than future land developments. The Federal Deposit Insurance Corporation (FDIC) lays down lending policies for lending institutions detailing loan-to-value limitations for land.

Land Fundamentals

There are multiple upfront challenges affecting raw plots that are not defined clearly. You ought to research the listed items to utilize the land as intended.


Access to utilities is crucial, especially for residential lots. Having sewer, water, and electricity saves money, time, and hassle. Access to public roads is vital as most land buyers prefer a convenient location close to a public highway.


You must have an understanding of what is included in the potential purchase. Have the boundaries set by surveyors and include everything on paper before presenting it to the land loan lender. You must also consider double-checking land use and zoning restrictions.

Land Loan Financing Options

You need to seek multiple ways to finance the land purchase. You may opt for seller financing or a home equity loan. Seller financing allows you to secure favorable terms, especially when the market is incredible and the land seller has to unload the land. It is essential to have the required papers reviewed by a lawyer before signing the documents to avoid unpleasant surprises and loopholes for either party. A home equity loan is ideal for buyers with little debt and those with existing properties. The loan has favorable terms compared to a regular land loan as it utilizes the equity of an existing property.

Purchasing land for the first time can be daunting, but you can use the listed tips for an easy process. Search for the right lender and consider multiple financing options before purchasing the land. Contact us at 18 Sierra Financial to secure finances for buying a piece of land.