Everything You Need to Know About Getting Land Loans And Farm Credits in Texas

In the popular imagination, Texas will always be associated with prairies, ranches, and cowboy culture. While the Lone Star State still has robust agriculture and livestock industries, these aren't the main reasons people are scooping up Texas land parcels today. 

An Overview Of Land Loans In Texas: What Are They, And Why Do People Buy Them?

In recent years, Texas has become a significant hub for in-demand industries like technology, energy, and healthcare. Texas's high-quality education and affordable taxes have also attracted thousands of new residents yearly. More than ever before, people want to acquire land lots in Texas to build their dream homes or take advantage of this state's business and agricultural opportunities. 

While some investors could buy Texas land outright, most use a land loan to finance their purchase. Similar to taking out a mortgage on a house, a land loan lets investors borrow funds to buy lots or acres in Texas. After putting a down payment on your Texas land loan, you'll need to make regular payments plus interest till all of the money is paid off. Land loans make acreage in Texas more affordable and accessible to individuals, families, and companies that want to take advantage of the Lone Star State's many opportunities. 

Explaining The Three Major Types Of Land Loans In Texas

Like other US states, Texas organizes its land loans into the following three categories:

• Raw land loans: Raw land refers to territory without access to essential resources like city water, sewer, roads, or an electrical drop or telephone. 
• Undeveloped land loans: While undeveloped land typically has essential services like electricity, it still needs significant work. 
• Improved land loans: Improved land has easy access to everything investors need to begin building a property, including utilities, clean water, and paved roads.

These loans have unique risk profiles, average payment schedules, and interest rates. Typically, raw land loans are the riskiest option and have the highest credit and interest requirements. Improved land loans tend to have more flexible payment options, but the total cost is usually greater than raw or unimproved land loans. 

No matter what type of land you're interested in buying, you need a clear vision of how you will use it. Banks and credit unions always ask for detailed construction or land development plans before issuing a loan. 

Qualifying For A Land Loan In Texas: What Do You Need?

Technically, anyone can apply for a Texas land loan; however, loan issuers typically hold borrowers to a high standard. Since there's a higher risk of a default and less collateral risk, banks and credit unions usually require applicants to have a credit score in the 700 range to take out a land loan. It's also unlikely that people with debt-to-income ratios below 40% will secure a Texas land loan.

To find out more about Land Loans in Texas consult with a member of the Land Broker Coop and have them give you a personal introduction to your local Farm Credit Bank Loan Officer. Between a Land Brokers Coop Member and your local Farm Credit Bank Lender they will have all of the answers you need and will make your land purchase in Texas an easy one, call today!