What to Know Before Buying Land: Your Complete Guide to Lot and Land Loans

Buying land can be the first exciting step toward building your dream home or investing in future growth—but it comes with different rules, risks, and financing requirements than buying a move-in-ready home. If you’re wondering what to know before buying land, this guide walks you through everything from zoning and utilities to how lot and land loans work. 

With the right planning—and the right lender—you can move confidently from land purchase to construction and permanent financing. That’s where OneAZ Credit Union comes in. 

Why Buying Land Is Different from Buying a Home 

Purchasing land is not the same as buying a home with four walls and a roof. Vacant land doesn’t generate income, doesn’t provide immediate shelter, and can’t be easily appraised the same way a house can. That makes it riskier for lenders and more complex for buyers. 

Before you buy, consider: 

• Location: Is the land near roads, schools, and services? 
• Zoning: Can you build what you plan to build? 
• Infrastructure: Does the lot have access to water, sewer, power, and internet? 

These factors affect not only what you can build—but also whether you can qualify for financing. 

What Is a Lot Loan? 

A lot loan (sometimes called a land loan) is used to purchase a parcel of land before construction begins. 

There are two main types of land: 

• Improved lots – Have utilities, road access, and approvals in place 
• Unimproved lots – Undeveloped land with limited or no infrastructure 

Improved lots are typically easier to finance and may qualify for better rates and lower down payments. 

A lot loan allows you to buy the land now and build later. Many buyers choose lenders like OneAZ because they can finance the entire journey—from lot purchase to construction loan to permanent mortgage—without having to switch lenders mid-process. 

How to Qualify for a Lot or Land Loan 

Qualifying for a lot loan is different than qualifying for a traditional mortgage. Lenders look at both your financial profile and the land itself. 

Here’s what typically matters most: 

• Credit score: Usually higher than what’s required for a home loan 
• Down payment: Often 20%–30% or more 
• Land type: Improved land is easier to finance 
• Intended use: Primary residence, future construction, or investment 

You’ll also need documentation such as purchase contracts, surveys, zoning info, and possibly construction plans. 

What to Know Before Buying Land 

Before signing a purchase agreement, it’s critical to do your homework. Here’s what to review: 

Zoning and land use 
Make sure the land is zoned for residential construction and that there are no restrictions that limit what you can build. 

Utilities and access 
Verify that the property has—or can get—access to water, sewer or septic, electricity, and public roads. 

Property taxes and insurance 
Vacant land still has property taxes, and insurance may be required for financing. 

Environmental and survey reports 
Check for flood zones, soil stability, wetlands, and boundary lines before committing. 

Financing Your Land Purchase

Unlike home loans, lot and land loans typically require higher down payments and shorter terms. Lenders also use lower loan-to-value (LTV) ratios because land is considered higher risk. 

A strong benefit of working with OneAZ is the ability to finance from land purchase through construction to permanent mortgage—making the process simpler and often more cost-effective. 

Common Questions About Lot Loans 

What credit score is needed for a lot loan? 
Most lenders look for a score in the high-600s and above, though stronger credit improves rates and approval odds. 

Are lot loans hard to get? 
They can be more challenging than residential home loans due to the added risk but having improved land and strong financials can make the approval process much smoother. 

What are typical loan terms? 
Lot loans often have terms of 5–15 years, sometimes with balloon payments or the expectation that you’ll refinance into a construction loan. 

How much down payment is required? 
Typically 20%–40% or higher, depending on land type and borrower qualifications. 

Steps to Take Before You Buy Land 

1. Get prequalified for a lot or land loan 
2. Review zoning, surveys, and utility access 
3. Compare financing options and interest rates 
4. Clarify your intended use for the land, whether it's for a future or immediate construction, long-term ownership, or another personal purpose. 

Using tools like a lot loan calculator and speaking with a local lender can help you estimate payments and plan ahead. 

Why Choose OneAZ for Your Lot Loan 

OneAZ Credit Union understands the Arizona land market and provides personalized guidance every step of the way. Whether you’re buying a lot in Phoenix, Flagstaff, or a growing rural community, you’ll get: 

• Local expertise 
• Competitive rates and flexible terms 
• A smooth path from land to construction to permanent financing 
• Access to financial tools, calculators, and real-time support 

You don’t just get a loan—you get a partner in your long-term plans. 

Final Thoughts

Knowing what to consider before buying land can save you time, money, and stress. From zoning and utilities to choosing the right financing, preparation makes all the difference. 

When you’re ready to take the next step, OneAZ Credit Union is here to help you finance your land purchase—and everything that comes after. Talk with a OneAZ lender today and turn your land into a future home.