Everything you need to know about land financing.
The upfront and closing costs for a land loan can vary widely depending on several factors, including the:
Lender
Loan amount
Location of the property
Specific terms of the loan
In the new guide Ag Land Loans 101: Loan Preparation, the FBN® Finance team explores the costs involved in farmland loans, including upfront costs and closing costs, the impact of current leases, and the financial information you’re required to provide when applying. Download the free guide here, or continue reading below.
The costs for a land loan can be substantial, often ranging from several thousand to tens of thousands of dollars, depending on the specifics of the loan and the property. It’s important to budget for these costs and discuss them with your lender to get a clear understanding of what to expect.
Let’s review what costs could look like, depending on which lender you choose and what your unique circumstances are.
Down Payment
Typical Range: 20% to 45% of the purchase price
Cost Impacts: Land loans often require a higher down payment compared to residential mortgages. The exact amount can vary based on the lender’s requirements and the borrower’s creditworthiness. A higher down payment may qualify for better pricing.
Application Fee
Typical Range: $100 to $500
Cost Impacts: Some lenders charge an application fee to cover the cost of processing your loan application.
Appraisal Fee
Typical Range: $1,500 to $3,000
Cost Impacts: Required to determine the value of the land, the appraisal cost can vary based on the size and complexity of the property.
Survey Fee
Typical Range: $500 to $5,000
Cost Impacts: Often required to verify property boundaries and identify any easements or encroachments, the survey cost depends on the size and complexity of the property.
Assessment Fee
Typical Range: $1,000 to $3,000
Cost Impacts: An assessment may be required to identify any potential environmental hazards or restrictions on the property.
Loan Origination Fee
Typical Range: 0.5% to 1.5% of the loan amount
Cost Impacts: This fee covers the lender’s costs for processing the loan.
Title Search and Title Insurance
Typical Range: $500 to $2,000
Cost Impacts: A title search is conducted to ensure there are no liens or legal issues with the property title. Title insurance protects the lender, and optionally the buyer, against any future title disputes.
Recording Fees
Typical Range: $50 to $200
Cost Impacts: These fees are paid to the local government to record the new deed and mortgage documents.
Attorney Fees
Typical Range: $500 to $2,000
Cost Impacts: Legal fees may be incurred for reviewing the loan documents, conducting the closing, and ensuring all legal requirements are met.
Escrow Fees
Typical Range: $300 to $700
Cost Impacts: An escrow company may be used to handle the closing process, including the transfer of funds and documents.
Property Taxes and Insurance
Typical Range: Varies
Cost Impacts: Depending on the timing of the purchase, you may need to prepay a portion of the property taxes and insurance.
Credit Report Fee
Typical Range: $25 to $50
Cost Impacts: Some lenders charge a fee to obtain your credit report as part of the loan application process.
Inspection Fees
Typical Range: $200 to $500
Cost Impacts: If the lender requires a property inspection, there may be additional fees for this service.
Broker Fees
Typical Range: Varies
Cost Impacts: If you use a mortgage broker to secure your land loan, there may be additional fees for their services.
Here is an example of an estimate for the upfront and closing costs for a $1 million land loan. Actual costs can vary based on the lender, location, and specific circumstances of the loan. For example, FBN Finance does not pass some of these fees along to the borrower.
Down Payment: $200,000
Application Fee: $500
Appraisal Fee: $3,000
Survey Fee: $2,000
Environmental Assessment Fee: $3,000
Loan Origination Fee: $10,000
Title Search and Insurance: $2,000
Recording Fees: $200
Attorney Fees: $1,000
Escrow Fees: $500
Credit Report Fee: $50
Inspection Fee: $500
Total Upfront and Closing Costs: $222,750
For a more accurate estimate, it’s best to consult directly with your lender or financial advisor, as they can provide specific details based on your situation and the lender’s requirements.
Thanks to FBN Finance’s low overhead, we’re often able to pass along cost savings to you.
| Other Lenders | FBN Finance |
Application Fee | $100 – $500 | Waived |
Survey Fee | $500 – $5,000 | Rarely required |
Assessment Fee | $1,000 – $3,000 | Rarely required |
Credit Report Fee | $25 – $50 | Waived |
Inspection Fee | $200 – $500 | Waived |
We developed a Farm Land Loan Calculator to bring much needed transparency to the typically ambiguous farm land loan process. By estimating rates and fees up front, the free calculator helps you effectively plan and strategize your financial options for future land purchases. You can see payments on an annual or a semi-annual basis.
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Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.
FBN’s Farm Land Loan Calculator provides estimated loan payments and interest rates for illustrative purposes only. The results are based on the information you provide and do not represent a guarantee of actual loan terms or conditions. This tool does not constitute an offer or commitment to lend. All loans are subject to credit approval as well as the underwriting policies and procedures of our lending partners. For personalized advice and accurate information, please contact an FBN Finance loan officer.
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