Unlock the door to your custom home-building dreams with land loans designed for today’s savvy buyers. These options are fresh air in a world where interest rates can turn dreams into dust.

It’s time to turn those emerald-green ambitions into reality without the burden of weighty financial commitments. Dive in as we unfold the story of your missed opportunities turning into blooming successes! Because cultivating your future shouldn’t be as unpredictable as harvest season.

Getting a land loan in Massachusetts typically requires meeting specific criteria such as having a good credit score, explaining the intended use of the land, and meeting necessary property checks like zoning and access to utilities.

It is advisable to explore options with local Massachusetts community banks or credit unions near the land and considerations like USDA loans for primary residences in rural areas or SBA 504 loans for commercial purposes.

From nearly forty years of selling land in Massachusetts, it is essential for potential buyers to know the lending requirements for land purchases. They are quite different than buying single-family homes.

Banks are more rigid when providing loans on land.

Let’s explore everything you should know to make sound decisions.

Overview of Massachusetts Land Loans

What is a Land Loan

Loan For Land Purchase in Massachusetts: What You Must Know

A land loan is financing provided to protective buyers looking to purchase a vacant lot or a larger tract of land. These personal, commercial, and business loans are used to buy land for specific needs.

We will be discussing buying land for the intention of building a Massachusetts home.

Whether you want an acre for a small home or five acres to build your mansion, a land loan could be your ticket.

These loans may come from government-related lending programs or private banks and lenders.

They Are Often Confused With Construction Loans

In my experience as a Realtor, a land loan is often mistaken for a construction loan, another type commonly utilized by individuals seeking to construct a house.

Many buyers don’t understand the difference between the two.

Typically, individuals opt for a construction loan to purchase land and begin construction immediately. These short-term loans are designed for aspiring homeowners eager to commence their construction projects immediately and have all the necessary plans and preparations in place.

With construction loans, borrowers must provide plans and the cost of building the house, among other things.

Eric Jeanette, the founder of FHA Lenders has shared his helpful advice on construction loans.

“Bill, land loans have become increasingly more difficult to find, especially if you are self-employed and have difficulty documenting your income.

If you are planning to build a home on the lot, make sure you also have found a lender to fund the construction.

One of the best programs to purchase a lot and build a home is the FHA One Time Close Construction Loan. With this program, you can purchase the lot and fund the build all with one loan and with just 3.5% down.

Land or lot loans, meanwhile, offer a preferable option for prospective homeowners who have a plan but may prefer not to embark on constructing and financing a house immediately.

If you are facing circumstances that delay your building project for a year or so or are still finalizing your home plans, a land loan is probably the most suitable choice.

Varied Usage of Land Loans

Depending upon the lender’s policies, borrowers can opt for several types of land loans that best suit their specific operational needs.

Below is a helpful table detailing some common types of lot loans:

Type Description
Raw Land Loans Used to purchase undeveloped plots without established improvements or utilities
Unimproved Land Loans Used to purchase plots that have some utility setup(electricity), but not all
Improved Land Loans Designed for properties with significant infrastructure support ready-in-place, like roads, water/electricity supplies


Acquiring a loan for land in Massachusetts is akin to building a house— just like there are different styles and layouts applicable when designing a home, adopting distinct types of land loans helps utilize funds in the most effective manner possible, tailored towards one’s unique requirements.

Borrowers must adhere to stiff credit score expectations regardless of the intended usage. The minimum credit score required is 640, although this requirement might vary by lender and region.

The maximum debt-to-income ratio (DTI) is usually no more than 41-43%.

Many traditional banking institutions may also require collateral, such as personal assets, to secure the loan. Therefore, having a solid plan with well-researched financial projections is crucial in getting the lender’s approval.

But what exactly can these mortgages accomplish? Let’s dive into some varied usage of land financing.

Different Types of Land Loans in Massachusetts

Massachusetts land loans are essential to rural financing. There are three main types of loans: raw land loans, improved land loans, and those secured through the US Department of Agriculture (USDA) Farm Service Agency (FSA).

Raw Land Loan

Raw land loans, also called lot loans, are used to finance the purchase of a vacant parcel of land that hasn’t been developed yet.

Essentially, it’s a loan for the dirt. The challenge with raw land loans is that they have higher interest rates and down payment requirements than typical home loans due to high-risk levels.

Depending on the lender’s requirements, a down payment ranging from 20% to 50% is needed. As a result, they are more challenging to obtain than other types of agricultural land financing.

Suppose you find an ideal parcel of raw land for sale at $150k. With a down payment requirement ranging from 20% to 30%, this could amount to up to $45k of out-of-pocket cash required upfront.

On top of that, interest rates on raw land mortgages are often higher than those for traditional home loans.

Raw Land Loan
Financing is available just for the dirt, and no improvements
Higher interest rates and larger down payment amounts required
It is more difficult to obtain as comparatively very few banks offer it

Unimproved Land Loan

Unimproved land is comparable to raw land but is generally more developed. At times, unimproved land may have certain utilities and facilities, yet it commonly does not have an electric meter, phone box, or natural gas meter.

These items may be available on the street, but no individual lot hookups are installed.

Applying for an unimproved land loan may not be as risky as a raw land loan, but securing it can still be challenging.

To enhance your approval chances, ensure you have a well-developed plan, a substantial down payment of 20% or more, and a solid credit score.

While unimproved land loans are not the most risky, the down payment and interest rates may be higher compared to other loan options, although not excessively so.

Improved Land Loan

Improved land loans aim to address providing low-cost capital for purchasing land or making improvements to existing property.

Unlike undeveloped land, improved land has essential infrastructure such as roads, electricity, and water.

Due to its advanced development, improved land may have a higher price tag. These items are what make a piece of land more valuable. They provide certainty to would-be buyers that the land can be developed.

Nevertheless, the interest rates and down payments for an improved land loan are lower than raw or unimproved financing. Making a substantial down payment and maintaining a good credit score is still essential.

Before purchasing, it is always wise for buyers to determine any restrictions or covenants with the land.

Vital Takeaway: When buying a lot in Massachusetts without public sewer, ensuring an approved septic system design is critical. Without getting an approved plan by the local board of health, you take a significant chance of buying unbuildable land.

When public water is unavailable, determining the local community policy on installing and testing a private well is essential.

Noteworthy Land Purchase Statistics

  • According to the Federal Reserve’s 2019 Survey of Consumer Finances, about 14% of families have taken some land loan.
  • A study published in Urban Studies Journal in 2020 found that interest rates on land mortgages can be 1-3 percentage points higher than traditional mortgage loans due to higher risk.
  • The National Bureau of Economic Research reported 2021 that the average down payment requirement for a raw land loan was between 20% to 50% of the land cost, significantly higher than home loans.

How Do You Qualify?

Qualify to Purchase Land in Massachusetts

How to Qualify to Purchase Land in Massachusetts

All land loan types have specific qualifications that borrowers need to meet. Nonetheless, there are also overall requirements that borrowers must satisfy to apply for a land loan.

Provide the lender with a description of what you intend to do with the land.

You’ll need to have an excellent credit score. Most lenders consider that to be 720 or above.

Land loan lenders will do background research. You’ll need to provide them with information such as a land survey, septic design (if no sewer), other utility access, and zoning requirements.

The lender will also require a title search to ensure no encumbrances such as liens or zoning violations.

After considering these factors, the lender can determine the rates and obligations of the land loan. The interest rates of loans for land in Massachusetts are almost always higher than home loan rates due to the lender’s risk.

Nevertheless, borrowers with a strong credit score and a low debt-to-income ratio (DTI) may be eligible for lower rates.

Once the loan rates have been established and the borrower’s approval is granted, the borrower must provide a down payment and repay the loan in installments at the agreed interest rate.

Specific Types of Loans For Buying Land in Massachusetts

There are a few options to choose from when making a land purchase. They are as follows:

Traditional Loans and Lenders

In my experience, local financial institutions such as community banks and credit unions are often more willing to provide land loans than large national banks.

I would highly recommend starting your search for financing with a local lender. Over the years, most of my clients have worked with well-known credit unions or smaller Massachusetts lenders.

A smaller institution is typically more familiar with the area and can provide a more accurate assessment of the land’s value and potential.

You can also try a Massachusetts mortgage broker with access to numerous loan programs.

Remember that your mortgage interest payments will add up if you plan to hold the land for a while.

USDA Rural Lot Loans

If you are considering constructing a primary residence in a rural area, the U.S. Department of Agriculture (USDA) offers two loan options to explore:

Both are tailored for families with low to moderate income and feature a repayment period of only two years. Despite this, the interest rates can be favorable.

For example, Section 523 loans have a minimal 3 percent interest rate, while Section 524 loans offer rates lower than the current market rate, with the rate for your loan being fixed at closing.

What Are The Pros and Cons of a Land Loan for Massachusetts Borrowers?


  • Investment opportunity: A land loan is the chance to invest in real estate, potentially generating future profits.
  • Secure an excellent spot for custom building: You can start your home building project at your leisure while locking up a desirable location.
  • Potential for appreciation: Land values can appreciate over time, providing the possibility of increased property value.
  • Flexibility in land use: With a land loan, there is flexibility in how the land can be used, such as for development, agriculture, or recreation.


  • Harder to find lenders: Far fewer mortgage lenders finance land purchases.
  • Higher interest rates: A land loan often has higher interest rates than traditional home mortgages.
  • Larger down payments: A loan for land will typically require a more significant down payment to secure the financing.
  • Limited financing options: Lenders may offer limited financing options for a land loan, making it more challenging to secure funding.
  • Lack of immediate income: Unlike rental properties, land typically does not generate direct income, which can impact cash flow.


Finding a loan for land in Massachusetts will be more challenging than traditional housing mortgages. They require more research and patience on the borrower’s part.