What this due-diligence check covers
Land loans may carry larger down payments, shorter terms or higher rates. Construction loans evaluate plans, builder, budget, permits and completed value.
Some buyers use a land loan first and refinance later, while others combine land acquisition and construction.
Why it matters before closing
Financing affects the maximum land price, due-diligence requirements, appraisal, closing schedule and cash reserve.
What to verify
- Speak with lenders before making offers.
- Ask how raw, improved and build-ready land are classified.
- Understand appraisal and equity treatment.
- Model interest, draws, conversion and contingency reserves.
Red flags that deserve follow-up
- Loan approval assumes utilities or access not verified.
- Balloon due before construction financing is ready.
- Land equity valued below purchase price.
- Construction budget excludes site work.
Evidence to keep in the parcel file
- Written lender scenario
- Loan estimate or term sheet
- Complete project budget
- Appraisal and draw assumptions
Questions to ask before the deadline
- How much down payment is required?
- Can land equity count toward construction?
- What site conditions must be complete?
- How are draws and interest handled?
- What happens if permits are delayed?