Residential and Vacant Land Lot Loans: A Comparison

Land lot loans are meant to facilitate the purchase of property on which to build. While there are some similarities, vacant land lot loans and standard residential loans do have some distinct differences.

Land Lot Loans for Vacant Real Estate

Vacant real estate loans are generally available to both commercial developers and would-be homeowners. When property is purchased using this type of loan, the land itself will serve as the collateral. The idea behind this type of loan is to obtain funding for eventual development of the land.

Since housing or commercial development is not already in place and may not even be planned immediately, this type of funding can be a little more difficult to obtain than standard residential funding. This is because land loans can be riskier for lenders.

Traditional Residential Loan Vehicles

While a traditional residential loan will include the funding for the purchase the land involved, it is not the same thing as a land lot loan. Funding of this nature is generally a little easier to obtain because the improvement is already in place or soon will be. This gives the borrower a greater stake in the property and more immediate use of it.

Land lot loans can facilitate the construction of residential property. This type of lending vehicle, however, is not the same as a residential loan per se.

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