What every buyer in North Texas needs to know before they apply. Down payments, loan types, approval requirements, and the mistakes that kill deals.
The biggest mistake land buyers make is assuming financing works the same as buying a house. It doesn't. When a lender approves a home loan, they're underwriting against a property that has a finished structure, an established market of comparable sales, and clear utility of use. If the borrower defaults, they can foreclose and sell a house to a pool of buyers.
Vacant land has none of those advantages. The market for any given parcel of raw land is smaller. Valuations require more judgment and fewer comps. The land doesn't generate income unless it's productive. All of that translates into risk, and lenders price that risk into their terms.
That means higher down payments, higher interest rates, shorter loan terms, and fewer lenders willing to compete for the loan. Understanding this before you make an offer is how you avoid surprises at the closing table.
Loan-to-value (LTV) is the ratio of the loan amount to the appraised value of the land. A lower LTV means a larger down payment. Here's how lenders typically apply LTV requirements across land categories:
| Land Type | Typical LTV | Down Payment | Notes |
|---|---|---|---|
| Raw Land | 65-75% | 25-35% | No utilities, no road access. Highest risk category. Fewer lender options. |
| Improved Land | 75-80% | 20-25% | Road access, electricity, water available. More lenders will compete. |
| Agricultural Land | 70-80% | 20-30% | Farm credit systems most active here. Income potential factors in. |
| Recreational Land | 65-75% | 25-35% | Varies significantly by lender and location. Portfolio lenders preferred. |
Note on appraisals: LTV is calculated on the appraised value, not the purchase price. If you overpay for land and it appraises low, the lender's loan amount is based on the appraisal. The gap is your problem to solve.
Not all land loans are structured the same way. Different loan programs serve different property types and borrower profiles. Here's a breakdown of the main options available to Texas land buyers:
Offered by banks, credit unions, and mortgage companies. Terms vary widely: 10 to 30 years, fixed or variable rates. Many community banks in rural Texas will do conventional land loans with local knowledge of the market, which can be an advantage in counties with thin comparable sales data. Credit requirements typically start at 680.
Farm credit institutions, including Capital Farm Credit (active throughout Texas), specialize in agricultural and rural real estate. They understand acreage in a way that conventional lenders often don't. Their rates can be competitive for qualified borrowers, and they're comfortable with raw and agricultural land that other lenders won't touch. They may require agricultural use or intent.
The USDA Farm Service Agency offers direct and guaranteed loans for agricultural land in qualifying rural areas. Income limits and property requirements apply. Not all rural Texas land qualifies, but buyers interested in productive farm or ranch land should investigate this option. Terms can be favorable for those who qualify.
Some sellers will carry the note directly, particularly on land they own free and clear. A seller-financed deal bypasses the institutional lender entirely. The buyer makes payments to the seller under a recorded contract. Terms are negotiable. This is a legitimate path for buyers who don't qualify for conventional financing or who are buying land that's hard to appraise. The risk: you're relying on the seller's terms, and due diligence on title is still essential.
The VLB land loan program is specifically for Texas veterans and active duty service members. It offers competitive fixed rates, terms up to 30 years, and a current loan limit of $150,000. The land must be in Texas, at least one acre, outside city limits, and have no existing structures. See the full VLB guide for eligibility details.
Most land loan failures come from a short list of problems. Some are borrower-side. Some are property-side. Knowing both before you're under contract saves you time and money.
The buyers who close land loans on time and at good rates do the preparation work before they start shopping. Here's what that looks like:
Pull your credit report from all three bureaus. Address any collections, dispute errors, and reduce revolving balances below 30% of your credit limits. This takes time. Do it six months before you plan to buy.
Two years of tax returns (personal and business if self-employed), W-2s or 1099s, and recent bank statements. If you have variable income, understand how a lender will average it. Don't wait until you're under contract to find out you're missing documents.
Calculate the down payment range for the land types you're looking at. Add estimated closing costs (1-3% of purchase price for land). Make sure those funds are liquid and well-documented. Lenders will ask where the money comes from.
A lender conversation before you find the land tells you exactly what you qualify for and what to fix. It also gives you credibility when you make an offer, as sellers in Texas land markets take pre-qualified buyers seriously.
Find out whether utilities are available at the property line or on-site. Confirm legal road access. Ask whether a survey exists. Check the flood map. Research the title. These factors determine which loan options are available and at what terms.
