4 Best Land and Lot Loans in Tennessee


Tennessee is known as the Volunteer State due to a strong tradition of military service. Its land has long been an asset to pioneers who moved west from the original 13 colonies and if you’ve ever driven across Interstate 40, you know that getting from one side of Tennessee to the other can be a long drive.

Tennessee is the 36th largest state by area, clocking in at an impressive 41,324 square miles according to the U.S. Census. The latest data pegs the average acre in Tennessee at a cost of $14,400 but like anything related to real estate, location is a big driver of the price. Whether you’re a family of ranchers looking to buy land or simply want a space to build your dream home, a land loan might help you start the process with ease.

A land or lot loan is a type of financing you can take from banks or other lenders to buy vacant land. Mostly, people purchase land with the intention of building a house later. The lender uses the block of land as security for the loan. Qualifying for a land loan is no different from other loans. Lenders assess the person’s borrowing power by checking their assets and income.

If you plan to take a land loan Tennessee for building a home, lenders may consider your loan less risky because you’ll eventually end up with a house on the property which will increase the lender’s collateral. Financial institutions offering traditional products like business loans, mortgage loans like home equity loans, and construction loans might also offer land loan products. Advanced research into loan rates or using a loan calculator service can help you through this home buying process.

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Benefits of getting a land loan in Tennessee

If you found a block of land in a place you love, a land loan can be the best option. Land loans often come in three flavors depending on the status of the land: raw, unimproved, or improved land. Raw land is an undeveloped piece of land, meaning it has no electricity or access roads. Raw land has cheaper financing options. Unimproved land is similar to raw land but has some amenities or utilities. However, unimproved lands lack natural gas or electricity meters. The final option is improved land which has access to roads, water, and electricity.

One significant benefit of acquiring a land loan in Tennessee is that you can build a customized house to your specifications on a piece of property selected by you. This type of loan allows you to personalize your space. Subject to credit approval, your loan amount will depend on the loan term, your credit score, and other factors. Also, building your own home allows you to manage the timeline and process at your convenience. For example, some people purchase land years in advance and only start building a house when finally ready. This provides an opportunity to have better plans and a well-thought house plan.

Here are a few things to consider before applying for a land loan:

(1) Your future development plans

When applying for a loan, have a clear plan in mind. Provide the lender with details on how to develop the land and ways of servicing the loan. Also, know the local zoning laws to determine if there are roadblocks to building on your plot.

(2) Consider your credit score 

Like any other borrower, people looking for land financing should have an excellent credit score. They need a good credit score, preferably 720+ and with income sources to support your ability to repay the loan. To keep your credit score up, pay off any outstanding debts and review your credit reports to make sure there is no incorrect information.

(3) Let your lender review your application

After assessing everything, your lender will offer you a land loan. Mostly, this depends on the credit score and the interest rate environment. The better the credit score, the lower the rates.

(4) Interest rates

Land loans have higher interest rates than mortgages. Lenders view lot loans as riskier than other home loans, so the lender’s often require higher interest rates. If you’re able to combine the lot loan together with a construction loan, you’ll possibly see a better overall deal.

(5) Make a down payment

You need money to secure a land loan. Other loans allow little down payments or none, but most land loans require a down payment. So, ensure you have down payment funds before moving forward.

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4 Best land loan lenders in Tennessee

1. First National Bank of Tennessee

If you’re interested in a land loan, the First National Bank of Tennessee has a product perfect for people looking to build a house. 

We contacted First National to verify a few details about their land loan product and they are light on details!Here’s what we discovered:

  • Lot loans are handled by a local banker
  • Prefer people purchasing land with intent to build a home
  • Believe they have competitive interest rates and flexible repayment terms

If you’re interested in connecting directly with a loan officer at the First National Bank of Tennessee that specializes in land loans, we can put you in touch with them directly.

2. Northeast Community Credit Union

If you’d prefer to work with a credit union when it comes to purchasing land, Northeast Community Credit Union has options for northeast Tennessee that are worth reviewing.

We contacted Northeast Community to learn about their land loan options. Here’s what they had to say:

  • Terms up to 15 years are available
  • Grant loans for vacant land
  • Can purchase or refinance with Northeast Community Credit Union later.

If you’re interested in connecting directly with a loan officer at Northeast Community Credit Union that specializes in land loans, we can put you in touch with them directly.

3. Wilson Bank & Trust

If you’re interested in a land loan, Wilson Bank & Trust serves the middle Tennessee area for land buyers interested in buying a lot, with the potential to build a new home or use the land for other purposes. 

We contacted Wilson Bank to verify a few details about their land lot loans. Here’s what we heard back:

  • They customize loans to fit your specific plans
  • Decision-making and processing is all done locally in Tennessee
  • Stable monthly payments to make budgeting easier

If you’re interested in connecting directly with a loan officer at Wilson Bank that specializes in land loans, we can put you in touch with them directly.

4. Tennessee State Bank

Tennessee State Bank offers statewide financing of land through a real estate loan product. Founded over 50 years ago, Tennessee State Bank has extensive experience providing mortgages and lot loans to the people of Tennessee.

We contacted Tennessee State Bank to learn about their real estate loan program and this is what we learned:

  • Funds may be used for purchases or refinancing,
  • Lot or land acquisition is OK
  • Money can also be used for construction or other business purposes.
  • They believe they have competitive rates in the market and flexibility to craft terms that fit your needs.

If you’re interested in connecting directly with a loan officer at Tennessee State Bank that specializes in land loans, we can put you in touch with them directly.

Does a Tennessee home land loan make sense for you?

Acquiring a land loan in Tennessee has some benefits and a few drawbacks. A land loan helps a borrower purchase land and build a customized home. Lenders are more willing to finance a loan if you intend to build a house because the property will add value and therefore increase the collateral to the bank. After taking a land loan, there is no rush to begin construction immediately, and the funds are released directly to buy the land.

Getting a land loan in Tennessee requires some advance preparation. Borrowers need to find the right lender and compare the lending program details across various banks. Also, keep in mind that if the land is undeveloped, there’s no collateral, making the loan riskier; thus, many lenders are less willing to process the loan. 

Therefore, it is best to work with a loan officer that specializes in land loans. This is a circumstance where you’ll appreciate the guidance from someone who handles lot loans all day every day.

If you’re looking to explore construction loans in other states, check out our national guide to land loans and get started exploring all 50 states.

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Joshua Holt

Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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