Thinking about buying acreage around Hico and not sure how to finance it? Land loans in Texas work differently than a standard home mortgage, and those differences can shape your budget, timeline, and offer strategy. You want clarity before you fall in love with a tract. In this guide, you’ll learn how land loans compare to home loans, what lenders look for in Hamilton County, and how to prepare your file so you can move fast on the right property. Let’s dive in.
Land loans vs home mortgages
Land loans are secured by the land itself. There is no house for a lender to rely on for value or income, so underwriting is more conservative. Conventional mortgages are built around a dwelling, standardized appraisals, and mortgage insurance rules. Land loans lean more on the intrinsic and future developable value of the acreage.
Expect higher down payments. For improved or buildable lots, many lenders ask for 15 to 25 percent down. For raw or unimproved land, you may see 20 to 50 percent down depending on the parcel and lender risk tolerance.
Terms are shorter and rates are higher. Land loans often run 5 to 20 years. Some include interest-only periods with a balloon payment at maturity. The rate usually carries a premium over typical 15 to 30 year home loans. Certain rural or agricultural programs may extend terms if the land will be used for qualified agricultural purposes.
Collateral and covenants matter more. Lenders focus on marketability, recorded access, utility availability, zoning or buildability, and environmental risks. Many require title insurance, an up-to-date survey, and clear legal access. Some loans include covenants like build timelines or restrictions on subdivision.
Underwriting looks different. Your debt-to-income ratio still matters, but lenders pay extra attention to appraised land value, intended use (recreational, residential build-site, or agricultural), and your liquidity or reserves.
Financing options in Hico
Conventional land and lot loans
These are common for buildable lots or acreage you plan to improve. Typical requirements include 15 to 40 percent down depending on whether the land is improved or raw. Lenders often want a credit score in the mid-600s or higher, proof of funds, and standard items like a survey, title work, and a land-specific appraisal. Terms are shorter than home loans and can include interest-only options with a balloon payment.
Construction-to-permanent loans
If you plan to build soon, a single loan can finance the lot and the construction with one closing. Once the home is complete, the loan converts to a mortgage. Expect to provide builder qualifications, plans, budget, and a draw schedule. Lenders underwrite to the completed home’s value.
Farm and ranch lenders
For agricultural use or larger tracts, farm and ranch lenders are often a good fit. These lenders are used to rural collateral and may offer longer terms or tailored underwriting for income-producing operations. Be ready to show agricultural experience or a business plan, plus financials if you plan to operate the property.
USDA program boundaries
USDA single-family housing loans apply to homes in eligible rural areas. They are generally not available for vacant land alone. USDA supports agricultural lending through different agencies. If you intend to build, review program rules early to see what may apply to your plan.
Seller financing
Owner carry can be common in rural Texas. The seller sets the down payment, interest, and amortization. If you go this route, secure a written note and deed of trust and obtain title work to protect your interests.
Home equity or cash-out refinance
If you already own real estate with equity, a home equity line or a cash-out refinance can be a way to buy land without a separate land loan.
Private or hard-money loans
Short-term and more expensive, these loans can help when speed is critical or a parcel does not fit traditional guidelines. Many buyers later refinance into a conventional structure once the property is improved or build-ready.
Appraisals and collateral in Hamilton County
Acreage around Hico varies widely. Appraisals can be challenging because large tracts and unique features reduce the number of direct comparable sales. Appraisers consider the property’s highest and best use, which may be residential development, recreational use, or agricultural use. That analysis will affect value.
Access and utilities are key. Lenders usually avoid parcels without recorded, legal access. You will want to confirm electric service, water source options, and septic feasibility. A failed perc test can materially impact buildability and lender willingness.
Topography and risk factors influence value. Steep slopes, rock, springs, floodplain areas, and wetlands can limit where you build and may reduce marketability. Review FEMA flood maps and plan for any required flood insurance or building restrictions.
Title, easements, and mineral rights deserve attention. Texas parcels often include recorded easements or severed mineral interests. Understand what is included with the surface estate and whether any development could be affected by mineral activity or existing agreements.
Expect a land-specific appraisal and current survey. Lenders typically require a land appraisal based on comparable sales, not a drive-by intended for a home. Many will ask for a current boundary survey showing access and easements. For larger or complex tracts, an ALTA survey may be requested.
What lenders will ask you for
Lenders use a more conservative set of checks for land loans. Being prepared can shorten your timeline and improve your negotiating position.
- Credit and income documentation: mid-600s credit scores are commonly preferred. Provide tax returns, pay stubs, and bank statements. If you are self-employed or plan agricultural use, be ready with business or farm financials.
- Down payment and reserves: bring more cash than a home purchase. Plan for the down payment, closing costs, and several months of reserves if requested. Document the source of funds.
- Property documents: purchase contract with contingencies, current title commitment, recorded plats, and a recent survey showing boundaries and access. The lender will order the appraisal. Depending on your plan, you may also need evidence of utility availability, septic permits or perc test results, and environmental reviews for larger tracts.
- Timing and contingencies: due diligence for land often takes longer than for a house. Build in time for surveys, perc tests, well evaluations, and title review. Include appraisal, survey, perc or well, and financing contingencies.
A practical prep checklist
Use this checklist to make your Hico land purchase smoother.
- Get pre-qualified with rural-savvy lenders
- Ask for their down payment, reserve, and documentation requirements for improved versus raw acreage.
- Clarify term options, interest-only features, and any balloon payments.
- Gather funds and documents
- Bank statements, tax returns, and proof of reserves.
- Gift documentation if applicable, per lender policy.
- Line up due diligence early
- Ask the seller for any existing survey and title work.
- Schedule a perc test and consult county environmental authorities about septic and well permits.
- Confirm access: is the road public or a recorded private easement? Who maintains it?
- Review FEMA flood maps and any local floodplain rules.
- Research property rights and restrictions
- Check county records for easements, covenants, and mineral reservations.
- Understand any restrictions on subdivision or land use.
- Structure a contract that protects you
- Include appraisal, survey, perc or well, and financing contingencies with realistic timelines.
- Allow time for follow-up tests if initial results raise questions.
How your agent can help
A local land agent can make a big difference with lender fit and due diligence. In the Hico area, an experienced brokerage can help you identify lenders who routinely finance Hamilton County parcels and introduce you to programs that match your intended use. You still choose your lender and should independently verify terms, fees, and eligibility.
Tai Klam and the COBB PROPERTIES team can also help coordinate critical steps such as ordering surveys, arranging perc testing, contacting county permitting, and facilitating title review. They can share a short list of lenders who finance vacant land, construction-to-permanent builds, and agricultural purchases, and outline typical timelines for each. The goal is to help you make confident decisions and keep your contract on track while you focus on evaluating the land.
If you are exploring acreage around Hico, you do not need to navigate financing alone. Reach out for lender introductions, a tailored prep checklist, and help structuring a contract that protects your interests. When you are ready, schedule your free consult with COBB PROPERTIES.
FAQs
Can you get a 30-year mortgage for raw land?
- It is rare. Most lenders offer shorter terms or interest-only options for raw land, with longer amortization more likely when you have a build plan or a construction-to-permanent loan.
How much down payment is typical for a Hico land loan?
- Expect 15 to 25 percent for improved or buildable lots and 20 to 50 percent for raw land, depending on lender policies and property attributes.
Do VA, FHA, or USDA loans cover raw land near Hico?
- FHA and VA do not typically finance raw land. USDA single-family loans are for homes in eligible rural areas and usually not for vacant land alone; USDA agricultural programs are separate.
What if the property has no recorded road access?
- Lack of legal, recorded access is a major lender red flag. You will likely need to secure an easement or documented access before closing to obtain financing.
How do mineral rights impact a Hamilton County land purchase?
- Mineral reservations can affect surface use if mineral owners exercise their rights. Review title for severed mineral interests and discuss implications with your title team.
How long does due diligence usually take on Hico acreage?
- Longer than a typical home purchase. Surveys, perc tests, well evaluations, and title review can take several weeks depending on local availability and property complexity.