Land loans in Texas

Land financing

How buying land is financed

Raw land, ranches and acreage homesites are financed differently from a house in a subdivision. Many lenders see vacant land as a riskier loan, so terms, down payments and paperwork vary a lot from one lender to the next. Talk to lenders early, before you write an offer, so your contract's financing timeline matches reality. This guide explains the main options buyers west of Fort Worth use and the documents lenders and title companies usually ask for.

Types of land lenders

• Farm Credit associations

  Customer-owned lending cooperatives that specialize in rural land, farms, ranches and country homes.

• Local banks and credit unions

  Community lenders often keep land loans in-house and know local values, roads and soils.

• Construction-to-permanent loans

  For buyers who plan to build soon. One loan can cover the lot, the build and the long-term mortgage.

• USDA programs

  Rural Development home loans (a home plus its site) and Farm Service Agency farm ownership loans for eligible farmers and ranchers.

• Texas Veterans Land Board

  Land loans for eligible Texas veterans and military members.

• Owner (seller) financing

  Sometimes offered on land. Terms are negotiated, so have a real estate attorney and title company review the documents.

Farm Credit lenders

The Farm Credit System is a nationwide network of borrower-owned lenders created to serve agriculture and rural America. Because they are cooperatives, many associations pay eligible borrowers a patronage dividend. In this area, AgTrust Farm Credit's Weatherford office lists Parker and Palo Pinto as its counties served and offers country-home, recreational, farm and ranch land loans. Other Texas associations serve neighboring counties. Use the Farm Credit lender locator to see which associations serve a property's county.

Jamie doesn't endorse any lender. Compare rates, fees, down payment, term and prepayment terms from at least two or three lenders.

USDA programs

Rural Development home loans (Section 502)

USDA Rural Development's Single Family Housing Guaranteed Loan Program helps low- and moderate-income buyers purchase, build or improve a primary residence in an eligible rural area with 100% financing through approved lenders. Funds can cover "a site with a new or existing dwelling," and USDA states there are no set acreage limits. The program is for a home you'll live in, not for buying vacant land on its own or for income-producing property. Check a specific address on the USDA eligibility site.

Farm Service Agency farm ownership loans

USDA's Farm Service Agency offers Farm Ownership Loans, both direct and guaranteed, that can be used to buy farmland or expand a farm. They are aimed at eligible family farmers and ranchers who meet FSA's requirements. Check FSA's site for current loan limits and eligibility.

Texas Veterans Land Board (VLB)

The VLB Veterans Land Loan Program, run by the Texas General Land Office, lends to eligible Texas veterans and military members to buy land. VLB's published requirements include:

• At least one acre, not counting land under public roads, navigable waterways or areas subject to frequent inundation
• Legal, usable access to a public road, at least 60 feet wide or the county's road-width requirement, whichever is greater
• A surveyor's sealed field-note description or a recorded subdivision plat
• Typically a minimum 5% down payment, subject to credit approval

Loan limits, rates and fees change, so check the VLB page for current figures.

Surveys

Lenders and title companies commonly require a survey on land. A current survey shows boundaries, acreage, easements, encroachments, road access and any flood zone notes. In Texas, surveys are performed by Registered Professional Land Surveyors licensed by the Texas Board of Professional Engineers and Land Surveyors.

A seller's existing survey may sometimes be reused if the title company accepts it along with a T-47 Residential Real Property Affidavit (or T-47.1 declaration) stating nothing has changed. On rural tracts, fences, new structures or a split from a larger parcel often mean a new survey is needed. Settle who pays for the survey in the contract.

Ag valuation ("ag exemption") basics

Texas lets qualifying farm and ranch land be appraised on its capacity to produce agricultural products, called productivity value, instead of market value. Many people call this an "ag exemption." According to the Texas Comptroller:

• The land must currently be devoted principally to agricultural use, to the degree of intensity generally accepted in the area
• It generally must have been in agricultural or timber production for at least five of the past seven years
• Wildlife management can qualify on land that was already qualified open-space land, with an active management plan
• If the land changes to a non-agricultural use, a rollback tax is due for each of the previous three years: the difference between taxes on agricultural value and market value
• Owners apply to the county appraisal district (Form 50-129 for 1-d-1 open-space)

Each appraisal district publishes its own guidelines for acreage and intensity. Before you buy, ask the seller whether the land currently has ag valuation and ask the appraisal district what you would need to keep it. Find any district in the Comptroller's county directory.

Land loan checklist

1. Talk to two or three lenders firstAsk about down payment, term, rate type, appraisal and survey requirements, and how long approval takes.
2. Confirm accessLegal, recorded access to a public road matters to every lender.
3. Check water, septic and utilitiesSee the well and septic guide and confirm electric service and line-extension costs.
4. Check the flood zoneSee the flood zone guide.
5. Order or update the surveyAgree in the contract who orders it and when.
6. Review restrictions, minerals and ag statusRead deed restrictions and the title commitment, and ask about rollback exposure.

Browse land and acreage or explore Weatherford, Springtown, Graford, Mineral Wells, Decatur and Jacksboro.

FAQ

Land loan questions

This content is general information, not legal, tax or lending advice. Programs, rates and rules change. Confirm details with the lender, the appraisal district, a title company or an attorney.