How to Buy Land to Build a House
Interested in learning how to buy a lot to build on? There are some distinct differences when buying undeveloped land compared to a home. Learn how to buy land with our tips!

Let’s take some of the stress out from buying land to build a house, shall we? While buying land to build a house is similar to purchasing an existing home, there are some important differences to understand. In the right situation buying land can be a smart investment towards building your dream home. All it takes is a little patience, detailed planning, and a vision.
I have purchased three homes and had another built, but I had never purchased vacant land with the intent of building in the future until recently. I’m going to share all of lessons learned: the good and bad.
You May Need a Higher Down Payment
You will most likely need a larger down payment when you get a loan to buy land compared to a traditional home loan. This is due to the fact that lenders are assuming more risk with an unimproved land loan. In their eyes, it’s much easier for a borrower to stop payment and walk away from the loan. While circumstances differ lenders may require 25% to 30% down payment.
There can be exceptions, however. Once you find the property you want, shop lenders to determine the best rate. If you are buying in a preplanned community there may also be a preferred lender who grants a lower percent down payment. We were able to get our lot loan with a 15% down payment.
Compare and Negotiate Land Prices
Do your research for comparable lot prices and builder prices. If you are dealing with a realtor then this should fall to them, however, as the home/land owner it’s important to be educated on the general process so that you can ask the right questions and be your own advocate.
You can start with your county website to see which lots/plots of land have been recorded as sold and the price. If you start in your lot neighborhood you should be able to determine the acreage and properly compare your desired property to those that have sold. Other sites like Zillow may also be of some assistance. Since you’re not dealing with an existing home you’ll likely be looking for the size of the property, water frontage or special features, etc. to help determine which other properties best compare.
Don’t hesitate to ask what the developer is charging builders if working in a planned community. Depending on the market, you may be able to negotiate for their builder discount. This can be around 5% or more depending on the area. You won’t know unless you ask.
Don’t Skip the Details
Read all documents pertaining to the land and pay attention to specifics. There are times where it’s easy to get caught up in the process. Ask if you can put down a refundable deposit to secure the lot while you review paperwork, especially if the market is hot.
I recommend that you take a break and read EVERYTHING. Take notes for follow up questions and ensure you fully understand the community covenants (if there are any), Home Owners Association (HOA) dues (even on unimproved land-if there are any), and HOA rules.
Don’t hesitate to ask for lower HOA dues until you have a certificate of occupancy. If you’re not actually living there you may be authorized a reduced rate. As an example, we are paying half dues until our home is built and occupied. If your lot is in an HOA community that is not fully built out in terms of amenities, it would behoove you to understand exactly what the developer has committed to building and what they have offered as a future build (which usually isn’t guaranteed).
Additionally, your community may require a financial reserve set aside to ensure that the plans you submitted to any review board are followed through and the home is built to community standards. In our case it’s a $4k fee that will be refunded in full after the build is complete and the Architectural Review Board has determined we are within community build standards. Knowing these details ensures you have the full picture when deciding whether to purchase or not.
Consult a Builder
Meet with a builder that is authorized to build in your community to walk your lot with you. If you have an idea of the type of home you would like to build it will be helpful to walk the lot with a professional to get a better idea of the size of the home (width and depth) you desire and if can fit on your lot. This can also give you a better idea of which trees and other landscaping characteristics you will likely be able to retain and which may be taken down in the construction process if your lot has not yet been cleared.
You’ll want to have a rough idea of the type of home you would like to build (ranch vs elevated vs two stories, etc) and which home types are allowed in your community (see above). Walking the lot with a builder will also give you an idea of clearing costs if necessary. While these are usually rolled up into the construction loan it’s still a good idea to understand especially if there are unusual circumstances such as filling in drainage ditches, grading the land, etc.
Timelines & Deeds
Ask about building timelines and deeds. Some communities will require you to build your home within a certain amount of time (around 2 years is common). However, there are others that have no build requirement. In terms of the deed to the land: is it a free and clear deed? Meaning are there any liens against the overall property developer? I would only purchase land that is free and clear-this prevents any financial risk if the developer fails to finish the overall community.
Understand the Construction Loan
A construction loan is slightly more complicated than a traditional loan. We made sure to ask our preferred lender how a construction loan would work in our situation. We wanted to understand prior to moving forward to make sure it would work for us. While our plan is to pay off the lot loan within a year and to utilize the equity in the paid off land to serve as the 20% down payment for the construction loan, it’s not quite that easy.
In our case, we’ll still need to have a percentage of the total construction loan in reserve cash (for us it is 1%) as well as monies up front to finance the first part of the build (in our case $30k).
Once the home is built we can then go through the paperwork to convert the construction loan to a traditional mortgage. While this will take place at least a year or two in the future it was important for us to understand the amount of money we needed to have moving forward to finance the overall build.
It Will Be Worth It!
So that sounds complicated and to a degree it is, but there are huge benefits to be had. The first is that you can stair step into your dream home and wind up with a lower overall mortgage. If you buy your lot first and are able to pay it off then you are going in with equity. As long as you don’t overbuild your lot (meaning you build too expensive or too large of a home for your neighborhood) you will have a much lower mortgage payment than if you purchased the lot with your home already built.
Another huge benefit is you get to build your own home. We loved this with our home in North Carolina. It was really fun to research and choose fixtures, colors, appliances, floors, etc. (that is a whole other post on smart choices for increasing your home equity and your ability to resell at a higher price).
We learned a lot in the process of buying land. If you are looking to buy a lot or buy land, we hope these lessons we learned can help you along your journey! If you have any questions, please leave them in the comments below and we’ll do our best to answer them!