When seeking lenders for land loans, assemble land portfolios, advises SFGate. Each land portfolio contains essential information that lenders review before making loan decisions. A loan portfolio must contain the estimated costs for installing gas, electricity, sewage and other necessary utilities. These portfolios may also contain estimated architectural costs associated with development plans.
Financing for raw, unimproved land purchases is difficult to acquire, says SFGate. Loans of this type are also called story loans, as borrowers must develop stories about their land plans that satisfy lenders. Typically, local lenders handle land loans, rather than national finance institutions. Landowners may finance buyers directly for short-term purchases.
Compared to mortgage loans, raw land loans have higher interest rates and down payment sizes, reports Bankrate. Lenders may demand down payments ranging from 20 to 50 percent. Before purchasing a plot of land, make sure the land has the proper zoning for its ultimate intended use. In some cases, it is possible to effect a zoning change for the parcel in question. In rural areas, low-income borrowers can qualify for Section 502 loans, direct loans offered by the U.S Department of Agriculture. Credit unions are good sources for land loans, but they may only extend loans for limited parcel sizes.