Land · Paying for Land
Raw land is financed differently than a house.
Most first-time land buyers expect a 30-year mortgage with a small down payment. Vacant land rarely works that way. This guide covers the main ways people pay for land, what each one asks of you, and where each one can go wrong.
By Dan Whelan, founder of New World Survival
Researched from government agencies, university extension services, and other published sources. See our sources
This guide is general education, not financial or legal advice. Loan limits, rates, and program rules change, and lenders set their own terms. Program figures below were checked against USDA sources in October 2026. Confirm current terms with the lender or your local USDA office, and have an attorney review any purchase contract before you sign it.
How land loans work
Why a land loan is not a home mortgage.
A house is collateral a lender knows how to value and resell. A wooded parcel with no driveway is not. That difference shows up in three places.[1]
A larger down payment
One Farm Credit lender in Florida describes land loan down payments as often 20 to 30 percent or more of the price, and sets a 25 percent minimum on its own lot loans. Plan for the high end until a lender tells you otherwise.[1]
A shorter term
Land loan terms of 10 to 20 years are common, compared with 30 years on a typical home mortgage. A shorter term means a higher monthly payment on the same amount borrowed.[1]
A different rate
Because raw land is riskier collateral, rates can run higher than home rates, and some land loans are adjustable. Ask every lender whether the rate is fixed, and for how long.[1]
If the land has a house on it
A property with a home you will live in can usually be financed as a home, which is a different and often easier loan. In eligible rural areas, USDA Rural Development's Section 502 guaranteed loan offers 100 percent financing, with no down payment, for qualifying buyers. The home must be your primary residence, the property cannot be income-producing, and household income cannot exceed 115 percent of the median. USDA's address eligibility map tells you whether a property qualifies.[2]
Your options
Five ways people actually pay for land.
Most purchases use one of these, and some combine two. A buyer might pair an FSA down payment loan with a commercial loan, or put cash down and let the seller carry the rest.
Option 1
Cash
Best for: small parcels, buyers with savings to spare
Paying cash avoids interest, lender fees, and loan approval. You still need a survey, a title search, and title insurance, because a lender is no longer requiring them on your behalf.
The tradeoff is liquidity. Land is slow to sell, so cash spent on a parcel is cash you cannot reach quickly. Keep your household emergency fund separate and intact, and budget for the costs that come after closing.
Option 2
Farm Credit lenders
Best for: agricultural land, rural homes, recreational tracts
The Farm Credit System is a nationwide network of lenders that traces back to the Federal Farm Loan Act of 1916. Its lending associations are owned by their borrowers, and the Farm Credit Administration, an independent federal agency, regulates them. Since 1971 the system has been authorized to lend to rural homeowners as well as farmers.[3]
Land is the core of what these lenders do, so they are often more comfortable with raw acreage than a general bank. Each association covers its own territory and sets its own products, so talk to the one that serves the county where the land sits.
Option 3
Local banks and credit unions
Best for: buyers with an existing banking relationship
Community banks and credit unions in rural counties often make land loans and keep them on their own books. Their terms vary more than anyone else's, which cuts both ways: some will lend on a parcel a larger bank will not touch, and some will not lend on land at all.
Ask three questions up front: the minimum down payment, whether the rate is fixed, and whether there is a balloon payment. Then compare the answers against a Farm Credit quote.
Option 4
USDA Farm Service Agency loans
Best for: people who will farm the land and cannot get reasonable credit elsewhere
FSA makes and guarantees loans to family farmers who cannot obtain credit from other sources at reasonable rates and terms.[5] Direct farm ownership loans go up to $600,000 with repayment terms of up to 40 years. Applicants must show enough education, training, or experience to manage a farm, and must be able to repay.[4]
The down payment loan is built for beginning and socially disadvantaged farmers. You put down at least 5 percent. FSA lends 45 percent of the lesser of the price or the appraised value, up to $300,150 on a price of up to $667,000. A commercial lender or the seller covers the rest. The FSA share runs up to 20 years at 4 percentage points below the direct farm ownership rate, with a floor of 1.5 percent.[5]
FSA defines a beginning farmer as someone who has not operated a farm for more than 10 years, will substantially participate in the operation, and does not already own more than 30 percent of the county's average farm size. Women and members of historically underserved groups are exempt from that acreage limit.[6] These loans fund working farms. They are not meant for a homesite or a weekend tract. Congress has proposed raising FSA loan limits, so confirm the current figures before you plan around them.
Option 5
Owner financing
Best for: buyers a lender will not approve yet, sellers who want steady income
The seller acts as the bank and you pay them over time. This can open doors that lenders keep closed, and terms are negotiable. It also carries risks that a bank loan does not, depending on how the deal is written. The section below covers both kinds of owner financing and how to protect yourself.
Before you shop
Get prequalified before you fall for a parcel.
Knowing your real budget first keeps you from spending weekends walking land you cannot buy. It also tells you which of the five options are open to you.
One Farm Credit lender described the first meeting this way: bring a financial statement, your last two or three years of tax returns, and proof of your savings, so the lender can see what you can put down and what payment you can carry.[7] Check your own credit report before that meeting so nothing on it surprises you. Our guide to credit reports and scores walks through it.
What the lender will look at
- Your income, assets, and credit. This sets the ceiling on what you can borrow.[1]
- An appraisal. The lender lends against the appraised value, not the asking price. If the land appraises low, you cover the gap or renegotiate.
- A survey. Boundaries, acreage, and any easements crossing the land.[1]
- Access and utilities. Legal road access, and how power will reach a building site.[1]
- Water and septic feasibility if you plan to build a home.[1]
- Your intended use and the zoning. A lender wants to know the plan fits what the county allows.[1]
Most of this overlaps with your own due diligence. The Before You Buy checklist covers the rest.
Owner financing
Seller financing can work. Read the paper first.
"Owner financing" covers two very different arrangements. The difference is who holds the deed while you are paying.
You hold the deed
Note and mortgage
The seller deeds the land to you at closing and takes back a promissory note and a mortgage, the same way a bank would. You own the land from day one. If you default, the seller has to go through foreclosure.[8]
The seller holds the deed
Contract for deed
Also called a land contract, land installment contract, bond for deed, or buying on contract. The seller keeps legal title until you make the last payment. You do not own the land until then.[9] Contracts like this often run 5 to 10 years, and owner-financed deals of either kind often end in a balloon payment, so plan now for how you will refinance it.[8]
What the CFPB warns about contracts for deed
- 1.You usually pay the taxes, insurance, and repairs while the seller still holds the deed.
- 2.After a missed payment or an unpaid balloon, the seller can often move to evict quickly, and may keep the money and work you put in.
- 3.The seller may have a mortgage or lien on the land, so you may not get clear title even after paying in full.
- 4.Some sellers collect money for taxes and insurance and never pay those bills.
- 5.Protections vary widely from state to state.[9]
How to protect yourself
- Order a title search before you sign, so you know about any mortgage or lien on the land.
- Have a real estate attorney in your state review the contract.
- Record the contract with your county land records office. The CFPB notes this can entitle you to notice if the property is sold, mortgaged, or liened.[9]
- Pay property taxes and insurance yourself, or through a third-party servicer, so you can confirm they were paid.
- Prefer a deed with a note and mortgage when the seller will agree to it.
For beginning and socially disadvantaged farmers buying on contract: FSA's Land Contract Guarantee can back a seller-financed sale. The buyer puts down at least 5 percent, the price is capped at the lesser of $500,000 or market value, the rate is fixed at no more than the direct farm ownership rate plus 3 points, payments are amortized over at least 20 years, and there is no balloon during the 10-year guarantee. The guarantee protects the seller, which can make a reluctant seller willing to carry the loan.[5]
Leasing first
Renting land can be the smarter first step.
USDA's own guidance for new farmers says renting may be a better option when you are starting out.[10] A lease costs far less up front and lets you find out what you actually need before you commit to a 20-year payment.
A season or two on leased ground teaches you the soil, the water, the frost dates, the neighbors, and how much time the work really takes. If the answer is "more land than I thought" or "less," you learned it without a mortgage.
Where to find land to lease
- Tell the local farming community you are looking. Many leases are never advertised.
- The Farmland Information Center's Farm Link Finder lists programs that match landowners with people looking to lease or buy.[11]
- Your county extension office and USDA Service Center often know which landowners are open to a tenant.
Put the lease in writing
A written lease should cover the term, the rent and when it is due, what you may build or plant, who maintains fences and water, and what happens to improvements when the lease ends. A "lease-to-own" deal is often a contract for deed under another name, so read it with the same care as the section above.
Budget the whole purchase
The listing price is not the whole cost.
These costs vary widely by county and parcel, so get written quotes before you make an offer rather than after. A buyer who plans for them stays out of trouble in year one.
At closing
Survey, title search, title insurance, appraisal, lender fees, recording fees, and attorney or closing-company fees. Who pays which of these is negotiable and belongs in your written offer.
Before you can build
A soil evaluation for a septic system, a well, a driveway, and bringing power to the building site. On raw land these can add up to a meaningful share of the purchase price.
Every year after
Property taxes, insurance, and upkeep of roads, fences, and drainage. If the land carries a farm or forestry tax valuation, ask what happens to that valuation, and to any rollback taxes, when it changes hands.
Keep a reserve. Close with money left over. A land purchase that empties your savings leaves no room for a failed well test, a washed-out driveway, or a job change in year two.
Related guides
Financing is one piece. Here are the others.
Before You Buy
Twenty questions to answer before you make an offer: access, water, soil, hazards, and the costs the listing leaves out.
Due diligence checklist →
Inherited Land and Heirs' Property
When land passes to a family without clear title, and the steps that keep it in the family.
Inherited land guide →
Rural Acreage
What rural land makes possible once you own it, and the tradeoffs that come with distance.
Rural acreage guide →
Sources
- Farm Credit of Central Florida. "How Do Land Loans Work in Florida?" Accessed October 28, 2026. farmcreditcfl.com
- USDA Rural Development. "Single Family Housing Guaranteed Loan Program." Accessed October 28, 2026. rd.usda.gov
- Farm Credit Administration. "History of FCA and the FCS." Accessed October 28, 2026. fca.gov
- USDA Farm Service Agency. "Farm Ownership Loans." Accessed October 28, 2026. fsa.usda.gov
- USDA Farm Service Agency. "Farm Loans Overview" fact sheet, October 2025. fsa.usda.gov
- USDA Farm Service Agency. "Beginning Farmers and Ranchers Loans." Accessed October 28, 2026. fsa.usda.gov
- Mossy Oak Properties. Rural land buying guide, January 5, 2023, quoting Jamey Nicholas of Southern Ag Credit. mossyoak.com
- Iarrapino, A., and E. Spellman, Conservation Law Foundation. "Owner-Financed Sales and Land Contracts," Chapter 3 of a farm finance guide hosted by the University of Vermont. uvm.edu
- Consumer Financial Protection Bureau. "Consumer Advisory: Help is available for people facing housing problems because of a contract for deed," August 13, 2024. consumerfinance.gov
- USDA. "How to Start a Farm: Find Land and Fund Your Operation." Farmers.gov. Accessed October 28, 2026. farmers.gov
- American Farmland Trust, Farmland Information Center. "Farm Link Finder." Accessed October 28, 2026. farmlandinfo.org
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