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6 Best Land and Lot Loans in Texas

Key Terms

Land loans are a great way to build a second or vacation home.
Land loans don’t require that you purchase any insurance or PMI like traditional home loans do.
Land loans are also available for agri-business or recreational purposes, like hunting or fishing.

You’ve heard it said many times—everything’s bigger in Texas. That goes for the acreage in the Lone Star State, too; according to the U.S. Census Bureau, Texas has a whopping 261,268 square miles of land, offering plenty of space for everyone, ranchers and farmers included.

Even with all that acreage, it’s becoming more and more difficult for Texans to buy a piece of texas real estate. Prices are going up, especially with new and modern homes. Some turn to older homes or renovations as an alternative, but that can become time-consuming and cost-prohibitive, and you don’t always get the home you want. The good things about land purchases though is that your purchased land may serve as collateral for an eventual Texas construction loan.

With a Texas land loan, you can take a creative approach, nailing down the lot size and location you want and then building when the time is right. With the value per acre of land in Texas at an affordable $7542.04, per the New Estimates of Value of Land of the United States, you may find that buying acreage and then building in time is a much more manageable prospect, especially for vacation homes.

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The pros and cons of a land loan in Texas

One of the big reasons why Texas home prices are growing so quickly is that demand often outstrips supply. This means it’s not only harder to save for a home that keeps getting more expensive, but when you’re ready to buy, you might not be able to get the home you want in the area you want.

Since most people don’t consider land and lot loans, and they’re all competing for the same inventory, you can skip the bidding wars and rejected offers, secure your lot, and plan for the next step. Owning a vacant lot also means you won’t have to pay most kinds of insurance on your property, and your property taxes will be low until you’ve built your home. So you can put that money towards your construction plans.

Another big benefit is that vacant land is always more affordable than homes, so you can look for property in the areas you really want to live in and still afford to purchase your lot.

What are the downsides to this approach? Land loans can have higher interest rates than mortgage loans. Lenders also sometimes ask for larger down payments, but with prices per acre as low as they are, you may find that a down payment on a land loan is not that scary, even for rural land with high acreage.

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6 Best Texas land loan lenders

If you’re in the market to purchase land in Texas, consider these land loan lenders that are available for projects in the state.

1. Frost Bank

Established in 1868 in the back of a mercantile store in San Antonio, Frost Bankers, Inc. is a dominant financial leader. It currently has $52.9 billion in assets and is one of the 50 largest U.S. banks. Frost Bankers offers personal lot loans for the building of residential property.

We asked Frost Bank for more details on their vacant land loan process and here is what they said:

Fixed interest rates
0.25% rate discount with automatic payments from a Frost Checking or Savings account
Rates and terms vary on loans $150,000 and greater
15-year amortization
Borrow up to 75% of the sales price or appraised value (the lower of the two) on lots valued up to $300,000
.50% Origination fee on all Lot Loans