How To Buy Land: Everything You Need To Know

How to buy land

Whether you want to start a family farm or build a home with built-in privacy, a plot of land can be the perfect solution. Although you may already know some of the details involved in buying a home, learning how to buy land is a totally different beast.

Want to learn the ins and outs to start your journey to land ownership? Here’s what to know about buying land.

How to buy land

Ready to buy land? Whatever your reasons for purchasing the land, here are the steps you’ll need to take.

1. Do your research to find the right spot

The ‘right spot’ will vary widely based on your unique goals.

For example, let’s say you want to create a family farm. In that case, you’d need to consider the soil type based on the type of crop you wish to grow.

Additionally, you should think about the amount of acreage you’ll need to create a financially viable farming operation. Plus, what water sources are available on the plot of land in question.

But if you are planning to build a house on a piece of land, the factors you’ll need to take into consideration are very different. A few things to keep in mind are the property’s utility hookups, road access, and the number of trees on the property.

Although it could be easy to overlook the importance of the number of trees on a lot, a single tree can cost hundreds of dollars to remove. With that, it is an important factor to consider if you are planning to build on this lot.

As you do your research about a particular property, don’t overlook the small details. The upfront homework will save you many headaches in the future. After all, you want to know exactly what you are getting yourself into when you move forward with a land purchase.

It can be exciting to dive right into a property. But an important part of learning how to buy land is learning how to do your due diligence on any potential property before making an offer.

2. Know how to pay for land

Whether or not you have a particular piece of land in mind, it is important to work out how you plan to pay for the land.

Pay in cash

One of the most popular strategies when buying land is to pay in cash. Unfortunately, many lenders consider a vacant piece of land more of a risk than a traditional home purchase. And with that higher risk, lenders will also provide less favorable terms to borrowers, leading to a higher interest rate than you want to pay.

Bank or credit union

Of course, not everyone can afford to pay for an entire property purchase in cash. And that’s okay! There are other options.

A bank or credit union may be willing to facilitate a land loan. In most cases, you’ll need to have a 20% down payment available. But some agricultural credit unions are willing to accept a 15% down payment on particular land purchases.

USDA loan

Another popular way to fund land purchases is through the USDA loan. The U.S. Department of Agriculture provides these loans to borrowers that intend to build their private residence on the land.

As a government program intended to promote rural community development, these loans are fairly accessible with minimal credit score requirements and low down payment options.

The catch with USDA loans is that not every plot of land will qualify. To see if the area you are interested in qualifies for USDA loans, explore your options on their interactive map. Plus, you cannot earn more than 115% of the area’s median income to take advantage of this opportunity.

Seller financing

A final option to facilitate your land purchase is seller financing. Although this is not an option in all situations, it can be a good opportunity if the seller is motivated to complete the property sale quickly.

Seller financing can come with risks for both parties. With that, it is a smart idea to get an attorney involved to finalize the terms of the deal in writing.

Where is the best state to buy land?

Now that you have a better understanding of how to buy land, where should you buy it? Is there a best state to buy land? The answer will vary dramatically based on your unique situation and will depend on your particular wants.

Determine the type of land you want and the climate

To start with, you need to decide what type of land you want. Do you want a beachfront lot or a mountainside abode?

Consider in which type of climate you would prefer to purchase the land. Are you looking for an arid plot in the desert? Or a tropical location near the beach?

Consider how you will use the land

Additionally, you should nail down what you want to use the land for. Do you plan to build a residence on it? Or are you simply planning to use it for farming, hunting, fishing, camping, or some other outdoor activity? The answer will dramatically impact the type of lots that will work for your situation.

If you are planning to build a home, the lot needs to be buildable. That means that the slope cannot be too steep, it can’t be in a wetland, and it needs to have diggable soil to set up a foundation.

Research any county restrictions

Look into the restrictions surrounding the property. Depending on the county, you may run into zoning issues that could prohibit your intended use. Additionally, consider any hazards in the area that could affect the safety of a potential building.

For example, a flood-prone lot is likely not the best candidate for a primary residence. When it comes to understanding how to buy land this point is really important.

Factor in the costs

Finally, consider the costs associated with your intended use. Although you may be able to afford the land, it is important to look beyond the start-up costs.

If you plan to build a home, map out those costs ahead of time to budget accordingly. If you plan to start a farm, don’t forget to factor in the equipment costs associated with that choice.

How to shop around for land

Ready to start shopping for the perfect plot of land? Here are some places to start your search:

  • Landandfarm.com. You’ll find farms, ranches, residential lots, and recreational plots on this site.
  • Landwatch.com. You’ll find farms, ranches, homesites, hunting land, and more available through this site.
  • Zillow (for lots). You can choose to search only for residential lots through the filtering feature with Zillow. This site is especially useful if you want to build a home on your lot.

The bottom line: It's important to understand how to buy land

Learning how to buy land is a bit more nuanced than buying a home. Luckily, the perfect plot of land is out there waiting for you to make your move.

Want to get your finances in order before this major purchase? Consider taking one of our free courses to help you create a financial foundation that will help you move forward with this next step confidently.

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