How to Buy Land to Build a House
- Craig Kaiser
- May 2
- 6 min read
Buying land to build your dream home is an exciting and life-changing endeavor, but it’s not without its challenges. From finding the perfect location to navigating zoning laws and budgeting for unexpected costs, there’s a lot to consider. This guide will walk you through the essential steps to help you make informed decisions and turn your vision into reality.
How to Buy Land to Build a House
Buying land to build a house can feel overwhelming, given the many steps involved. The first and most important step is deciding where you want to live and determining how you'll finance the property. Once that’s settled, you can collaborate with a builder to kick off the construction process and bring your vision to life.
1) Consider Where You Want to Live
Before teaming up with a real estate agent or searching for land to buy to build a home, it's essential to decide where you want to live. Take time to reflect on your goals and what suits your lifestyle. Do you value being close to the city for easy access to restaurants, entertainment, and activities? Are you an outdoor enthusiast who wants to live near parks and nature? Or perhaps you're raising young children and seeking a family-friendly community in the suburbs? Identifying your priorities will help you pinpoint the ideal location for your needs. Once you've clarified what matters most, you can start searching for land that aligns with your vision.
2) Set a Budget
The next step for buying land to build a home is to set a budget. It's important to note that the average value of land per acre can vary by location and by the type of land. The U.S. Department of Agriculture’s Land Values Summary reports that the average cost of an acre of land is $3,100. However, the actual price you’ll pay can vary greatly depending on the location, the level of development, and several other factors. Remember that in addition to the cost of purchasing the land itself, you’ll also need to account for land development expenses. Purchasing vacant land and financing the construction of a new home can often be significantly more expensive than buying a pre-owned home, regardless of location.
3) Figure Out How to Pay for the Land
The next step is determining how to finance the land purchase and the construction of your home. Below, we’ve outlined several financing options to help you secure the funds needed to buy raw land.
Land Loans: A land loan allows you to purchase a plot of land for either residential or commercial use. However, qualifying for a land loan is more challenging than securing a mortgage, as there’s no home to serve as collateral. Most lenders will require a down payment, and if approved, you’ll receive the funds needed to buy the land and repay the loan, plus interest, over time. Loan terms and conditions can vary depending on the lender.
Personal Loans: A personal loan can also be used to purchase raw land. These loans, available through banks, credit unions, and online lenders, are unsecured—meaning they don’t require collateral or a down payment. While they’re generally easier to qualify for than land loans, they often come with higher interest rates and shorter repayment terms.
Construction Loans: A construction loan is a short-term financing option designed to cover the costs of purchasing land and building a home. It funds expenses such as land acquisition, labor, materials, and necessary permits. Once construction is complete, the loan typically transitions into a standard mortgage. These loans often come with variable interest rates, stricter credit requirements, and usually require a minimum down payment of 20%.
Land Contracts: A land contract is a financing agreement where you purchase land directly from the seller, bypassing the need for a traditional lender. Instead of securing a mortgage, you make payments directly to the seller until the full balance is paid off. These agreements offer greater flexibility, as the terms are negotiated between you and the seller. This makes land contracts an appealing option for buyers with poor credit who may not qualify for conventional mortgage loans.
4) Find Land for Sale
Once you've decided where you want to live and secured your financing, it's time to begin your search for land. You can find land for sale on various real estate websites like LandApp. With LandApp, you can filter listings by acreage, price, location, and more to find your perfect plot. Additionally, each listing is embedded with a Building Suitability value index score that lets you know how difficult it would be to build on a specific parcel, allowing you to conduct due diligence at a glance:
Partnering with a real estate agent is highly recommended, as they can help you find properties that meet your needs and budget- often including listings you might not discover on your own. When you identify the perfect plot, your agent can guide you through negotiations with the seller. A skilled agent will also ensure the contract includes provisions to protect you in case the land is deemed unsuitable for building.
5) Conduct Due Diligence
Conducting due diligence and researching the land is the next and most critical step for buying land to build a house. Failing to consider these factors before purchasing land could leave you unable to build on it entirely:
Utility Access: Ensure that the land has a viable access point to utilities, like electricity, gas, and water. Discovering that your Land doesn't have easy access to utilities after the purchase could be a significant problem, potentially forcing you to incur substantial additional costs. Installing electricity on rural land can be expensive, so it is something that you should not overlook when searching for land to build a house on.
Street Access & Accessibility: To access your property, it must be connected to a street or road, unless you’re planning to park on the roadside and walk the rest of the way. If the land is landlocked, you’ll need to secure an easement from a neighboring property. This legal agreement grants you the right to cross the neighbor’s land to reach your own.
View ordinances: Certain local-view ordinances may limit your ability to add a second story to your home. Restrictions on the type of house you can build could impact its future resale value, potentially costing you both opportunities and money.
Check Zoning: Before making any improvements or additions to your property, check with the local zoning office to ensure that you are allowed to make the desired changes. Zoning regulations may restrict the type of construction, materials used, and size of structures on your land.
Understand Flood Zones: If your property is located in a flood-prone area, you’ll need to take extra precautions when building or renovating. This may include elevating your home above ground level or using special materials that can withstand water damage.
Conduct an Environmental Assessment: Having a professional evaluate the environmental quality of your land is crucial, especially to uncover potential hazards that may not be immediately apparent before purchase. Environmental assessments are conducted in two phases. The first phase, known as a Phase 1 Report, involves a thorough inspection of the land's visible and physical conditions by an environmental engineer to identify any signs of contamination. If concerns are found, a more detailed second phase may follow. This phase typically includes in-depth testing and analysis of soil, water, and air samples to ensure the land meets safety standards.
6) Get a Land Survey and Appraisal
The primary goal of a land appraisal is to determine the market value of a property. Appraisers evaluate factors such as zoning, accessibility, and other key features, comparing the land to similar plots in the area to establish its worth. Skilled appraisers also incorporate off-market sales and historical data to ensure precise and reliable valuations.
On the other hand, a land survey focuses on identifying a property's boundaries, size, shape, and physical characteristics. Surveys are particularly useful for detecting accessibility challenges, such as landlocked plots, and resolving disputes over boundaries or easements with neighbors. Surveyors also provide essential insights into easements, encroachments, and the location of nearby public utilities, offering clarity and preventing future conflicts.
7) Have a Builder Assess the Land
If you’re planning to buy land for a custom home, it’s a good idea to consult a homebuilding contractor early in the process—even before making the purchase. Having a contractor inspect the land beforehand ensures the property is suitable for the type of home you envision.
There are advantages and drawbacks to hiring a contractor before or after purchasing your plot. Choosing a custom homebuilder before buying land allows them to recommend plots that might be more cost-effective or better suited to your desired home design. On the other hand, purchasing land first gives you more freedom in selecting a plot, but tailoring the home design to fit the property’s unique characteristics can often increase costs.
Whether you're building a single-family home or undertaking a large-scale, master-planned community, involving a contractor early on provides valuable insight into costs and feasibility, helping you make more informed decisions.
Find Land for Sale to Build a House
LandApp's marketplace makes it simple to find land for sale across the United States, tailored to your needs for building a home. Each listing is enriched with detailed data and analytics, allowing you to conduct due diligence efficiently. From zoning information to property boundaries and nearby resources, LandApp provides the insights you need to make informed decisions at a glance. Whether you're looking for urban plots or rural acreage, the platform helps streamline the search process, ensuring you find the perfect location for your home-building project.
