I think it is safe to say that many (if not most) people are familiar with the ins and outs of buying a home and getting a mortgage. It is pretty transparent and above board. Lenders need financial data such as what your income is, what your debt-to-income ratio is, your financial and credit history and more. They need to know what type of down payment you are prepared to bring to the table and what assets you have, such as stock and bond portfolios, other property or investments. It is all about minimizing risk for the lender while offering the customer a competitive and fair deal. Buying land involves many of the same considerations, but land financing can be a little different, so you need to know what questions to ask when buying land.
Whether you want to buy some property for a homestead, a weekend getaway, a hunting camp, an investment to take advantage of land appreciation or as a business venture to harvest timber or even pine straw, unless you are very well off, you need a lender to make your dream a reality.
To shed some light on the nuances of buying and financing land versus buying and financing a home, we reached out to Daily Thomas, VP of Lending with First South Farm Credit. First South Farm Credit is a member-owned cooperative that has served agricultural and rural customers for more than 100 years, with branches throughout Alabama, Mississippi and Louisiana.
Thomas says that many people who call First South Farm Credit are frustrated because, while they can find a bunch of lenders ready and able to loan money on a house, it is a challenge to find a financial institution that is willing to make a loan on a piece of property.
“When I talk to people, I find out that the hardest part for them is finding a lender who is willing to finance it. A bank, a credit union or a mortgage company doesn’t generally want to carry fixed rate land loans on their books for a long term. And if they do, you will likely see a higher down payment and interest rates and you will often be looking at an ARM or other unfavorable terms,” Thomas said. “At First South, land financing is what we do all day, every day and we try to make it as easy and convenient as we can.”
Thomas pointed out that land financing is more specialized than traditional home financing, and not every lender offers it.
“We are professionals who care about our customers and, at the end of the day, we want to make sure that we are protected and, at the same time, looking out for our customers to make sure they are protected as well,” Thomas said. “When people want to buy land and have never done it before it is nice to have someone who can take them through the process and give them some peace of mind in knowing that someone is looking out for them.”
First South finances a variety of property sizes and land uses, including homesteads, recreational property, pasture, cropland and timberland.
Thomas emphasized that regardless of the size of the parcel a customer wants to buy, the process is basically the same and all customers are treated equally.
“The ten acres that someone wants to build a house on one day is just as important to them as the 1,000 acres someone wants to hunt on. It is the same process with the exception that the larger loans mean a little more work on our end for appraisals to make sure everyone is protected but the general process is the same,” Thomas said.
Financing is only part of the due-diligence process. Before buying rural property, buyers should also determine whether the land has legal access, review the survey and title, check for easements or deed restrictions, understand local zoning and land-use requirements, determine what utilities are available, and consider whether portions of the property lie in a flood zone. Those issues can affect both how the property can be used and how it can be financed.
Thomas’s Four Questions to Ask When Buying Land
1. What down payment do I need?
Down payment requirements can vary depending on the property, the borrower’s financial position and how the land will be used. Land loans commonly require a larger down payment than a traditional home mortgage, so this is one of the first questions a buyer should discuss with a lender.
Thomas recommends talking with a lender early in the process so buyers understand how much cash they may need upfront and how the size of the down payment could affect their financing options.
2. What are my options?
First South currently offers a variety of financing options, including fixed rates up to 30 years, variable-rate loans and flexible loan terms and payment plans. The right structure depends on the property, the buyer’s financial situation and what the buyer ultimately plans to do with the land.
Because land purchases can vary widely, Thomas recommends discussing the available loan structures with a lender who understands rural property and can help match the financing to the buyer’s long-term plans.
3. What interest rates go along with those options?
Interest rates can vary based on the borrower’s creditworthiness, down payment, loan structure, term, property and the overall interest-rate environment. Rather than focusing only on the advertised rate, Thomas recommends discussing the different loan structures and terms available with a lender.
The best financing option can depend on how the buyer plans to use the property, how long they expect to own it and their overall financial situation. Working with a lender who specializes in land financing can help buyers compare those options and determine which structure makes the most sense for their particular purchase.
4. How long will it take to close?
When it comes to the amount of time needed to close, Thomas says that First South’s commitment to the customer is what sets FSFC apart from other lenders.
“Everyone wants to close as soon as possible, and we do too, but we’re never going to rush something just for the sake of closing. That’s when things get missed and problems arise,” Thomas said.
The time needed to close can vary depending on the property and the type of loan. Appraisals, title work, surveys, legal access and other due-diligence items can all affect how quickly a land purchase reaches the closing table. Buyers can help keep the process moving by providing requested documents promptly and addressing any property-related questions as early as possible.
One of the benefits of doing business with First South Farm Credit is that borrowers become members and stockholders in the cooperative and may be eligible to share in its profits through patronage refunds. In 2026, First South announced $23.2 million in patronage refunds to member/borrowers, marking the 31st consecutive year it has returned a portion of its earnings to its customers. Patronage refunds depend on the cooperative’s financial performance and approval by its board of directors.
