Vacant land loans vs raw land loans: What’s the difference?

If you’re planning to buy land in the U.S., one of the first questions you’ll face is: should I get a vacant land loan or a raw land loan?

Lenders use these terms to describe two very different types of property. Knowing the difference helps you understand your financing options, down payment requirements, and how much risk a bank sees in your purchase.

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Quick Definitions

• Vacant land: A parcel without buildings but with some improvements, such as road access, utility hookups, or zoning that makes development easier.
• Raw land: Completely undeveloped property with no utilities, infrastructure, or sometimes even legal access.

These definitions may sound simple, but they have a big impact on how lenders view your loan application.

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Vacant Land Loans Explained

Vacant land loans are used when you buy a lot that’s “ready to build” in many respects. Think of a suburban plot with paved streets and utility lines already in place.

Typical loan features:

• Down payment: 20–30%
• Interest rates: 6–9% (varies by lender)
• Terms: Up to 15–20 years

Because vacant land is closer to construction-ready, banks see it as a lower risk compared to raw acreage.

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Raw Land Loans Explained

Raw land loans are for completely undeveloped land. This might be farmland with no water access or remote acreage without electricity.

Typical loan features:

• Down payment: 30–50%
• Interest rates: 8–12% (often higher than vacant land)
• Terms: 5–10 years

Lenders see raw land as riskier because it requires more investment before it can be built on or resold.

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Vacant Land vs Raw Land: Side-by-Side

Here’s a direct comparison that most buyers find helpful:

Feature	Vacant Land Loan	Raw Land Loan
Infrastructure	Roads, zoning, utilities often in place	No utilities, no access, no improvements
Risk Level	Lower	Higher
Down Payment	20–30%	30–50%
Interest Rates	6–9% typical	8–12% typical
Loan Term	15–20 years	5–10 years
Best For	Building a home soon	Long-term holding, farming, recreational use

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Which Loan Is Easier to Get?

For most beginners, a vacant land loan is easier to secure. Lenders are more comfortable financing property that already has improvements in place. Raw land loans are harder to qualify for and usually require more cash upfront.

💡 Pro Tip: If you’re unsure how payments might look, you can test scenarios with a vacant land loan calculator or a raw land loan calculator.

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Example Scenarios

• Scenario 1: Vacant Land
  You buy a $60,000 suburban lot with road access. With 25% down ($15,000), the bank finances the rest over 15 years at 7% interest.
• Scenario 2: Raw Land
  You purchase $100,000 of rural acreage with no utilities. A lender may require 40% down ($40,000) and offer only a 10-year term at 10% interest.

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Risks and Misconceptions

• Vacant land ≠ raw land: Many beginners confuse the two, but lenders treat them differently.
• Taxes and zoning: Always confirm local property tax rates and zoning rules.
• Resale challenges: Raw land is harder to sell, which is one reason financing is stricter.

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FAQs About Vacant vs Raw Land Loans

1. What’s the main difference between vacant and raw land?
Vacant land has some improvements like roads and utilities. Raw land is completely undeveloped.

2. Which loan type is cheaper?
Vacant land loans usually have lower rates and smaller down payments.

3. Can you build right away on vacant land?
Often yes, since zoning and utilities are in place, but always check local rules.

4. Why are raw land loans harder to get?
Because the land is undeveloped, lenders see higher risk if you default.

5. Can USDA or FSA loans cover raw land?
Some government programs allow financing for farmland, but requirements are strict.

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Final Takeaway

The difference between vacant land loans and raw land loans comes down to infrastructure and lender risk. Vacant land is closer to being build-ready, making it easier and cheaper to finance. Raw land requires larger down payments, higher interest rates, and shorter loan terms.