Land loans in Texas work much like a mortgage, but with tougher terms: lenders see vacant property as weaker collateral than a house, so you’ll put more money down, pay a higher interest rate, and hand over more documentation before closing. How much more depends on three things: whether the land has utilities and road access, how strong your financial profile is, and a handful of Texas-specific issues (mineral rights, agricultural tax rollbacks, seller financing rules) that can change the deal.
How Land Classification Sets Your Terms
Texas lenders sort vacant property into three tiers based on existing infrastructure, and the tier largely dictates your down payment and rate.
- Raw land has no roads, no utilities, and no water or sewer access. It’s the hardest to finance. Expect 35% to 50% down and the highest rate of the three tiers. Some banks won’t lend on raw land at all because comparable sales are hard to find for the appraisal.
- Unimproved land has some basic infrastructure, maybe a gravel road or one utility connection, but not the full package. Down payments usually start at 25% to 30%.
- Improved land has full utility access, paved frontage, and often a survey already on file. Some lenders go up to 75% or 80% loan-to-value, so a 20% down payment is realistic.
Classification matters beyond the loan itself. If you plan to build on raw or unimproved land, you’ll pay out of pocket to bring in infrastructure before construction. A water well typically runs $3,000 to $9,000, and a septic system adds another $3,600 to $12,500 depending on soil and local permitting. Lenders will ask whether those costs are accounted for.
What Lenders Want From You
Most lenders want a credit score of at least 680 for competitive rates on vacant land, though some will work with scores as low as 620 on an improved lot with a strong down payment. Raw acreage pushes the bar higher. Debt-to-income typically needs to stay below 43%, and some lenders want cash reserves covering six to twelve months of payments.
Interest rates on land loans generally run one to two percentage points above a conventional home mortgage. Rates in the 7% to 10% range aren’t unusual depending on the land type and your profile. Some borrowers negotiate interest-only payments for the first few years to keep monthly costs down while they plan construction, though not every lender offers that structure.
Appraisal works differently too. Instead of comparing your parcel to recently sold homes, the appraiser looks at sales of similar vacant parcels in the last six to twelve months and weighs zoning, soil, topography, frontage, and utility access. Good comps for rural acreage can be scarce, which is why land appraisals take longer and sometimes come in low. If the appraisal falls short, you cover the gap in cash or renegotiate.
The VLB Option for Veterans
Texas offers something no other state does. Through the Veterans Land Board, run by the Texas General Land Office, eligible veterans and active-duty service members can borrow up to $200,000 to buy land at below-market rates with just 5% down on a fixed 30-year term. Two individually eligible veteran spouses can apply together on the same tract and borrow up to $275,000.1Texas General Land Office. Land Loans
You must be a Texas resident when you apply and meet one of the service criteria: active duty, Texas National Guard, a reserve component member with 20 qualifying years, or a veteran with at least 90 active-duty days and an honorable, general, or medical discharge. Surviving spouses of veterans who died in service or are listed as missing in action also qualify. The tract must be at least one net acre, and the VLB assigns no value to existing improvements, so this program is strictly about the land.
Documents and Inspections to Line Up
The documentation package is heavier than a home purchase because the lender is underwriting the dirt itself.
Start with the legal description from the current deed, available from the county clerk where the land sits. You’ll also need a professional boundary survey from a Registered Professional Land Surveyor; Texas law requires that registration for anyone performing boundary surveys.2State of Texas. Texas Occupations Code 1071 – Land Surveyors The survey sets boundaries, flags easements and encroachments, and gives the lender the metes and bounds description it relies on. Budget $500 to $2,500 depending on acreage and terrain.
Expect to add a plot map, evidence of zoning compliance for your intended use, and proof the parcel isn’t bound by restrictions that would block your plans. Some lenders require a Phase I Environmental Site Assessment to flag potential contamination, roughly $2,000 to $4,500 in Texas. If there’s no municipal sewer, a soil percolation test may be required to confirm septic suitability. Check FEMA flood maps as well; if the parcel sits in a Special Flood Hazard Area, your lender will require flood insurance.3FEMA. Flood Maps
Mineral Rights: The Texas-Specific Trap
This is where Texas land deals differ sharply from most other states. Land ownership in Texas includes two separate estates: the surface estate and the mineral estate. When someone sells the surface but keeps the minerals, the mineral estate is legally dominant.4State of Texas. Texas Natural Resources Code 91 – Section 91.755 The mineral owner or their lessee can use your surface to explore, drill, build roads, and lay pipelines without your permission and without paying for non-negligent damage.5Railroad Commission of Texas. Oil and Gas Exploration and Surface Ownership
The accommodation doctrine offers some protection, requiring a mineral lessee to modify operations when reasonable alternatives exist and an existing surface use would otherwise be destroyed. The protection is narrow and litigated case by case. In some metropolitan-area counties, developers can create a “qualified subdivision” under Chapter 92 of the Texas Natural Resources Code to impose drilling-site restrictions, but that option isn’t available everywhere.5Railroad Commission of Texas. Oil and Gas Exploration and Surface Ownership
Before you buy, verify whether the mineral rights convey with the surface. If they were severed decades ago, the deed chain should show it. Severed minerals can shrink appraised value and make lenders reluctant to finance. A title search should reveal the status; ask the title company directly rather than assuming the minerals come with the land.
Agricultural Appraisals and Rollback Taxes
Many rural Texas parcels carry an agricultural appraisal under Texas Tax Code Chapter 23, Subchapter D, which taxes the land on its agricultural productivity rather than market value. The savings are real. But if you buy ag-appraised land and change its use to anything non-agricultural, you’ll trigger rollback taxes covering the previous three years of tax savings, plus interest at 1% per month from the date each year’s taxes would originally have been due.6Texas Comptroller. Land Use Tax Bills
The rollback bill arrives the following February 1, at least 20 days after delivery, and missing that deadline adds penalties and attorney fees.6Texas Comptroller. Land Use Tax Bills On a large tract that’s enjoyed years of agricultural pricing, the rollback can easily reach five figures. If you’re buying ag-exempt land to build a home or commercial project, ask the seller or the county appraisal district for the current ag valuation versus the market valuation so you can estimate the exposure before closing.
Seller Financing and Executory Contracts
Seller financing is common in Texas land deals, especially rural acreage where traditional lenders don’t want to lend. The seller plays the role of the bank and you make payments directly to them. When the seller keeps legal title until you finish paying, the agreement is an executory contract (sometimes called a “contract for deed”), and Texas law imposes strict buyer protections on these deals.
The seller must own the property free and clear before entering an executory contract. If an existing mortgage is on the property, the seller must disclose the outstanding balance, monthly payment, and the risk that the lienholder could foreclose if the seller stops paying.7State of Texas. Texas Property Code 5 The seller must record the executory contract with the county within 30 days of signing and provide you with an annual accounting statement each January showing amounts paid, balance remaining, and payments left.8State of Texas. Texas Property Code 5 – Section 5.062
Sellers who skip recording or annual statements owe liquidated damages. A seller who does fewer than two transactions a year owes $100 per missed statement; a seller doing two or more owes $250 per day after January 31 until they comply, plus attorney’s fees in either case. These rules exist because executory contracts historically left Texas buyers vulnerable to losing years of payments when sellers never delivered title. A seller who resists recording the contract or sharing documentation is a serious warning sign.
One exception matters: if the seller delivers the deed within 180 days, the stricter executory contract rules don’t apply. Many seller-financed deals are structured this way to avoid the extra compliance.
Closing Timeline and Costs
Once your documentation is in, you submit through a Texas bank, credit union, or specialty land lender. The lender orders a land-specific appraisal built on vacant-lot comps rather than developed homes. This phase usually takes two to four weeks, sometimes longer for remote parcels.
After approval, the file moves to a title company. The title company confirms the seller holds clear title and issues a title insurance policy protecting you and the lender against defects. At closing you sign the promissory note and the deed of trust, which is the lender’s security instrument. Most Texas land loans close within 30 to 45 days of application, often funding the same day the documents are recorded at the county.
Closing costs typically run 2% to 5% of the loan amount: appraisal fee, title search, title insurance, survey (if not already done), recording fees, and inspections. Bring a cashier’s check or arrange a wire for the down payment and closing costs; personal checks aren’t accepted at most closings.
What Default Looks Like in Texas
Texas is a non-judicial foreclosure state. If your deed of trust includes a power-of-sale clause (and virtually all do), the lender can foreclose without going to court. You get a notice of default by certified mail, and if the default isn’t cured within the required period, the property sells at public auction on the first Tuesday of the month at the county courthouse.
The process moves fast compared to judicial-foreclosure states. From a first missed payment to auction can be just a few months. There’s no redemption period in Texas after a non-judicial sale, so once the property sells, you can’t buy it back. If you’re stretching to make land payments while planning construction, build a reserve before you close. Missing one payment starts the clock, and catching up gets harder once fees and penalties start accruing.