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Ultimate Guide to Owner Financed Land Texas: Pros and Cons

Owner financing refers to a type of real estate transaction where the property owner acts as the lender, providing financing to the buyer.

Owner financing can offer advantages such as easier approval, more flexible terms, and reduced closing costs, but also carries risks such as higher interest rates, increased risk for the buyer, and dependence on the owner’s financial stability.

It is important to carefully consider the pros and cons of owner financing before entering into an agreement.

If you feel overwhelmed by discerning whether this option is right for you, let us help with this ultimate guide to owner financing.

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What is owner financed land?

In general, owner financing is a type of real estate transaction where the property owner provides financing to the buyer, rather than a traditional lender such as a bank or mortgage company.

Owner financed land is also referred to as “seller financing” and is an alternate option to traditional bank financing.

Through owner financing, you make the payment on the land directly to the seller of the property until the land purchase is paid off.

This means that the buyer makes payments directly to the owner, who acts as the lender, rather than to a financial institution.

The terms and conditions of the loan are typically negotiated between the buyer and the owner, and the land itself is used as collateral for the loan.

Owner Financed Land in TX: Our Listings

Browse our properties to see which ones have the option for owner financing and let us know if you have any questions. We would love to talk with you about owning your own piece of the great state of Texas!

Milam Ranch 1 Lot E1


12.65 acres


Hardin, TX

Deer Creek Subdivision

Starting at $225,900

10.01 – 23 acres


Luling, TX

cows drinking from a pond under a tree in texas

Woodrow Ranch Subdivision

Starting at $249,900

11.04 acres


Kingsbury, TX

Rolling Ridge Subdivision

Starting at $159,900

1 – 2+ acres


Nevada, TX

Vista Acres Subdivision

Starting at $199,900

2 – 4+ acres


Coupland, TX

yorktown ranch acres for sale near san antonio in texas

Yorktown Ranch Subdivision

Starting at $109,900

10+ acres


Yorktown, TX

Other Financing Options: Traditional Bank Financing

Whether you are buying your first plot of Texas land or are a seasoned Texas land investor, we have the beautiful acreage and the financing options to make it possible for you to own land in Texas.

1. Bank

In order to qualify for bank financing the buyer will need good credit and good employment history. We have special relationships with our lenders. Contact us for a list of great lenders!

2. Capital Farm Credit

Capital Farm Credit is a customer-owned cooperative, providing financing to rural landowners, country homeowners, agricultural operators and agribusiness firms throughout Texas.

3. Texas Veterans Land Loan

This option is offered to veterans who are residents in Texas. Learn more about the Texas Veteran Land Loan option.

It’s important to research and compare the different types of bank financing options to determine which one is right for you.

central texas river near acres of land for sale by owner

How Does Owner Financing Work? The Process of Owner Financing

It can be difficult to find the kind of financing needed to buy your own land. Our goal is to make it as easy and affordable for the buyer as possible. That is why we offer owner financing for Texas land on many of our properties. Owner financing works like this:

  1. Find Land: Look at our eligible seller financed land and find the perfect acreage for you. 
  2. Agreement: The buyer and the owner of the property come to an agreement on the terms and conditions of the loan, including the interest rate, payment amount and frequency, and the length of the loan. 
  3. Down Payment: The buyer typically makes a down payment on the property, which is used as collateral for the loan.
  4. Monthly Payments: The buyer makes monthly payments directly to the owner, who acts as the lender. The payments typically include both principal and interest.
  5. Repayment: The buyer continues to make payments until the loan is fully repaid. Once the loan is paid off, the property ownership is transferred to the buyer.
  6. Default: If the buyer fails to make payments or breaches the terms of the loan agreement, the owner has the right to take possession of the property and sell it to repay the outstanding loan balance.
  7. It’s important to have a clear understanding of the terms and conditions of the loan, including the interest rate, payment schedule, and any penalties for default, before entering into an owner financing agreement.

How Owner Financed Land Texas Works at Lonestar Land Sales

Eligible Property

View our properties eligible for owner financing. Once you find the perfect tract for you, contact us and we will be happy to go over the financing options with you.

Down Payment

With any land buying financing, you will need to be prepared to secure your investment with a down payment. The down payment for owner financing is low and usually averages about 10% of the purchase price of the tract you are buying.

Interest Rate

The interest rate on owner financing is fixed for the entire term of your loan which means that your payment will not go up. Just like with any other financing, the interest rate on owner financing loans can be affected by the market fluctuations but once you lock in an owner financing loan, it will stay fixed rate.


We divide out the payments over 30 years but terms are also flexible depending on your down payment amount.

5 Advantages of Owner Financing (aka the Pros)

1. Less obstacles for buyers

If you are ineligible for traditional financing methods, owner financing may be your saving grace. There are many scenarios for this. For example, if your income is not consistent, let’s say you work for yourself and have a seasonal income, securing a bank loan may be a huge headache. Also, you will not have your credit checked which means that you do not have to go through the process with the risk of not getting approved.

2. Low money down

Owner financing may allow for a low money down payment. This frees up the buyers finances for other important expenses. Typical down payment on an owner financing loan is 10% down whereas a traditional bank loan usually requires 20% down. Because you are dealing directly with the seller, there might be some flexibility in the down payment

3. Short wait to obtain land

Typically, owner financing allows for the buyer to obtain their land quicker than traditional financing. The process can go much quicker and smoother because there is less paperwork and no waiting for approval.

4. Closing costs lower

It is possible for closing costs to be lower when seller financing. Closing costs may be lower because you are not involving a big financial institution – less administrative fees with fewer parties involved. You are dealing directly with the seller.

5. Less paperwork

A fan favorite positive to owner financing is how there is less paperwork! No more sitting in a room signing a book of paperwork to buy your land.

Want help? Our Land Experts make finding your perfect property a priority and aim to make this process as easy as possible. They save you time, money, and uncover hidden issues for first-time buyers.

3 Disadvantages of Owner Financing (aka the Cons)

1. Higher interest rates

It is well known that the lower the interest rate, the better for the buyer. Knowing the current interest rate at large can be helpful when negotiating. You may be able to guarantee the loan with owner financing but it is important to carefully review your circumstances to determine what is best for you.

2. Dependence on the owner’s financial stability

There is a dependance on the buyer when entering an agreement with them. Knowing the owner’s history in land sales may help determine if they are the partner you are looking for in your land purchase journey. For instance, Lonestar Land Sales deals with many owners who have been financing land for over 20 years. It is important to know who you are doing business with.

3. Lack of liquidity

The property is used as collateral for the loan.

large tree on a texas field filled with flowers and sold by owner with financing available

Things to Avoid When Owner Financing

Owner financing land in Texas is a great way to purchase land without the need for a bank loan. However, there are certain things to be aware of and avoid when it comes to owner financing. 

This section will discuss four key things to watch out for when owner financing land in Texas. By understanding and avoiding these common pitfalls, buyers can ensure that the process of purchasing land through owner financing goes smoothly.

1. Confirm when & where you are allowed to build

While owner financing your land can look like the best option for you to buy your land, you need to understand what restrictions exist for the property you are buying. 

These will set the parameters for when and where you can build. There may be easements or minimum square footage for builds and you need to know those so that you buy the land that best suits your needs and wants. 

The last thing you want is to buy the land you want and find out that you can’t build what you want due to different restrictions. 

To avoid this, you can simply ask if there are any restrictions you need to be aware of and ask what the process is to get buildings approved. This will allow you to have a great experience from buying land to building on it. 

2. Know all the terms for your owner financing loan

So many people get fixated on the purchase price of their land and never look at the terms. Terms include things like interest percentage, the length of the loan, or other costs included in the loan. 

At Lonestar Land Sales, we will deal with you fairly and find a win-win solution but that is not the case for all organizations that sell land. Be sure you are very clear on the loan terms. You also want to be aware of any early payment penalties when you are owner financing land. 

Most of the time owner financing land is not a long term solution but you still want to make sure you won’t be penalized if you pay back the loan early.

3. Know if a credit check or referencing will be required

One of the benefits of owner financing land is there are fewer requirements to get “approved”. However, there will still be some requirements, which is dependent on the seller and what they want to see. Always check to see what might be required to make sure you are comfortable with the process.

4. Make sure you can afford the down payment & monthly payments

This one seems obvious but it sneaks up on so many people who are buying land. You want your land to be a blessing, the right place for you to enjoy all the hard work you put into being able to buy this beautiful land. 

The last thing you want to do when owner financing land is to buy it and find that the payments are a burden on you. Part of this risk should be mitigated through the sales process where it’s confirmed that you have the ability to make the monthly payments. 

However, you can negotiate the monthly payments lower by offering a larger down payment, if possible, or have a longer loan term. However if you choose to do it, be sure that you are setting yourself up for success when buying land and that the monthly payment fits your monthly budget.

texas field at sun set with blooming flowers

Frequently Asked Questions about Owner Financing

We have compiled a list of the most frequently asked questions about the owner financing option that is typical to most of Lonestar Land Sales properties. We put in the work to get these questions answered so that you don’t have to. 

Is there a prepayment penalty with owner financing?

With our owner financing loans, there is no prepayment penalty if you decide to pay off the loan early.

How much do I need to put down for owner financed land?

The down payment on the owner financing option is lower than your traditional bank financing option which usually asks for 15-20%. For the owner financing loan, the down payment amount is typically 10% of the purchase price.

Is there a credit check with owner financing through Lonestar Land Sales?

With owner financing, your loan is approved without a credit check. The purpose of this is to allow everyone to have the same opportunity to buy land regardless of your credit.

Do all of your properties have an owner financing option?

Most of our subdivisions offer tracts of land with owner financing options but not all of our tracts offer this option. These tracts go fast so if you find your dream property, don’t delay and contact us. We are happy to help you with your purchase.

If I qualify for both owner financing and a conventional loan through a bank, which one should choose?

There are many advantages to both options. If it comes down to the choice between the two for you, you need to do what is right for you and your situation. Lonestar Land Sales can help you in this process and we are happy to answer any questions you have about the land buying and financing process.

Can you build on owner financed land?

Absolutely! The land is yours and it is now time to start living your dream. Don’t forget to check for any restrictions on the property before you build. Again, Lonestar Land Sales can help you with that!

Why is the owner financing option a great option for me?

If you are a first-time land buyer or an experienced land buyer, owner financing is a great option for you. The process is easy and gives you a relatively quick way to get your land purchased.

Contact Us About Owner Financed Land


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