Land Loan vs. Home Loan: What’s the Difference? 

Are land loan requirements the same as a home loan? 

In recent years, more families are trading city life for a rural lifestyle, leading to a surge in demand for agricultural land. For many, understanding the difference between a land loan vs. home loan can be confusing, as the land financing process has both similarities and differences from your typical home mortgage.  

Here are some key differences and similarities between home loans and agricultural land loans to help land buyers navigate the process with ease. 

Agricultural Land Loan Requirements 

Before comparing an agricultural land loan to a home loan, it’s important to first recognize their similarities, which often surpass those shared between an agricultural land loan and a farm operating loan. 

Both agricultural land mortgages and residential mortgages are long-term loans secured by real property and typically have fixed or variable interest rates. In contrast, agricultural operating loans are short-term loans used to cover the costs of day-to-day farming operations, such as equipment, seed, or labor, and are generally not tied to the land itself. 

Similarities Between Land Loans vs. Home Loans 

While the process for acquiring a land loan vs. a home loan differs in some respects, there are several other similarities as well. 

• Collateralized Loan: Just like a home mortgage, the land you’re purchasing serves as collateral. This means that your land lender will typically obtain a survey and appraisal of the land to assess its value. 
• Application Process: The application process involves familiar steps, including a credit check and property review. Understanding the required documents for a land loan will help you and your land lender streamline the application process.  
• Fixed and Variable Rate Options: Both home loans and agricultural land loans can offer fixed or adjustable interest rates. However, home loans tend to favor fixed-rate, long-term structures due to their predictability and stability for homeowners. Agricultural land loans, on the other hand, are more customizable, allowing for various loan terms and payment structures that can better fit the unique needs of an operation. 

Differences Between Land Loans vs. Home Loans 

The key differences between land loans and home loans are primarily in terms of the loan structure and requirements. Most notable differences pertain to:   

• Closing Timeline: One of the biggest differences between home loans and land loans is the closing timeline. For residential mortgages, the process is usually completed in about 30 days, but land loans tend to take longer—around 70 days on average. There are also several other factors that differ, such as the purpose of the loan, eligibility criteria, loan structures, and how funds are used. Understanding these distinctions can ensure you’re well-prepared for the journey ahead.  
• Appraisal Process: For land loans, appraisals typically take longer and cost more than traditional home loan appraisals. This is a key factor that can extend the closing timeline. 
• Term Length: Home mortgages often come with 15- or 30-year terms, while land loans usually have shorter terms, often just a few years, or up to 15 to 20 years. However, AgAmerica offers land loans with terms as long as 30 years to accommodate the needs of landowners. 
• Down Payment: A larger down payment is typically required for land loans. Generally, a 30 to 40 percent down payment is most common. However, down payment requirements are often product-specific and dependent on the collateral type and the strength of the borrower.
• Interest Rates: Land loans have a wider range of potential interest rates (and could be higher) depending on credit, land types, and LTV. However, AgAmerica offers interest-only land loan options for landowners looking to preserve capital for operating needs. 
• Land Use Focus: AgAmerica specializes in agricultural land financing, which means the land’s agricultural value is more significant than its infrastructure value. This is an important distinction when applying for a land loan for farming or other agricultural purposes. 

Secure Your Perfect Agricultural Land Loan with AgAmerica 

At AgAmerica, we are singularly focused on providing financing for agricultural land use. Our expertise in this field ensures our clients receive the best possible financing tailored to their unique needs. Whether you’re looking for a conventional land loan or interest-only land loan options, we offer a variety of choices to help you achieve your landownership goals. 

Explore AgAmerica’s land financing options today.