Raw land and unimproved land are not interchangeable terms

Borrowers and even some agents use "raw land" and "unimproved land" as if they mean the same thing. In underwriting, they don't. The distinction usually comes down to how far a parcel is from being buildable, and that distance is exactly what a lender is pricing when it looks at a land deal.

Raw land

Raw land is a parcel in its natural, undeveloped state. There is generally no graded access road, no utility connections at or near the property line, and no site work of any kind has occurred. It may also carry no clear entitlement path — meaning zoning, permitted use, or subdivision potential hasn't been established or tested. This is the category lenders view as carrying the most uncertainty, because there's little to underwrite beyond the dirt itself and the borrower's plan for it.

Unimproved land

Unimproved land still lacks structures, but it typically has some infrastructure nearby or partially in place — a legal access easement, proximity to utility lines, or a parcel that's already been through some level of subdivision or zoning review. It hasn't been built on, but it's a step closer to being buildable than raw land, and that step matters to underwriting.

So which one is "better" to finance?

The honest answer is that the question isn't really raw versus unimproved — it's exit strategy versus exit strategy. A private money mortgage company underwriting a land deal is less concerned with the label on the parcel and more concerned with how the borrower gets out of the loan: entitlement and refinance, a build-and-sell timeline, or a straightforward resale. Underwriting is also concerned with release value and marketability — what the parcel is realistically worth to a buyer if the borrower's plan falls through, and how quickly it could actually sell at that value. Unimproved land often supports a clearer, faster exit simply because it's further along, which is why it tends to be less challenging to arrange financing against. Raw land can still be financed, but the equity position, the exit plan, and the borrower's experience with that type of parcel all carry more weight in the decision.

What Hanover Mortgage Company looks at on a land deal

Every transaction is underwritten in-house, with custom loan documents ordered for the specific California property — land included. Financing is asset-based, though light documentation is still required.

• Access and utilities — legal, physical access to the parcel and proximity to power, water, and sewer or septic feasibility.
• Entitlement status — whether zoning, use, and any subdivision work is established, in process, or untested.
• Equity position — loan-to-value is evaluated case by case on land; Hanover MC does not quote a standard land LTV, since parcel-to-parcel variation is significant.
• Exit strategy — refinance into a construction or takeout loan, entitlement-and-sell, or another clearly defined plan.
• Environmental status — Hanover MC does not take on properties with known environmental issues.
• Business purpose use — land financing is arranged for business purpose; Hanover MC will also arrange owner-occupied scenarios as long as the transaction is structured as business purpose.

Why banks are often the wrong first call for land

Traditional banks and credit unions tend to have narrow appetite for undeveloped land, particularly raw land with no established entitlement path or income-producing use. Where a bank's underwriting model wants a stabilized asset or a clear amortization story, land is neither. A few concrete reasons banks tend to pass:

• No cash flow to underwrite. Bank models are built around debt-service coverage — a tenant, a lease, an operating history. Vacant land produces no income, so there's nothing for that model to attach to.
• Land carries a higher regulatory risk weighting. Bank capital rules generally treat raw and unimproved land as a higher-risk asset class than income-producing real estate, which makes it more capital-expensive for a bank to hold on its books relative to the loan size.
• Appraisals are harder to support. Comparable land sales are often thinner and less recent than comparable sales for a built, occupied property, which makes it harder for a bank appraiser to defend a value with the certainty bank underwriting wants.
• Entitlement and environmental risk sit with the collateral. Unresolved zoning, unclear access, or potential environmental exposure on the parcel itself is exactly the kind of open-ended risk a bank's committee structure is built to avoid, not underwrite through.
• Committee timelines don't match land deal timelines. Land deals — an entitlement window, a time-sensitive purchase, a note coming due — often move faster than a bank's multi-step committee review can accommodate.

That gap is where a private money mortgage company arranging business purpose financing against real property equity — rather than income or DTI — becomes the more workable path for many California land owners.

Land loans Hanover Mortgage Company has arranged

This isn't theoretical — Hanover MC has arranged financing against unimproved and vacant land parcels across California. A few past closed transactions, pulled from our Transactions page:

The land due diligence checklist: getting from "raw" to "developable"

Every land loan question — raw or unimproved — eventually comes down to the same underlying goal: is this parcel realistically on a path to becoming developable, and is that path knowable enough to underwrite? These are the categories that come up over and over in land-investor forums and in what Hanover MC asks to see before evaluating a parcel.

1. Soils

What the ground is actually made of drives everything downstream — bearing capacity for a foundation, percolation rate for a septic system, and whether grading or import fill will be needed. The USDA NRCS Web Soil Survey is free and parcel-searchable, and it's usually the first stop before ordering a paid geotechnical report.

2. Protected species and habitat

A parcel that looks like empty scrub or grassland can still sit inside mapped habitat for a threatened or endangered species, which can restrict grading, timing of construction, or use entirely. The U.S. Fish & Wildlife Service's IPaC tool generates a species list for a specific parcel and is the standard starting point before a biological survey is ordered.

3. Utilities that can actually be accessed

"Near" utilities and "connectable" utilities are two different things. Confirm actual points of connection — or realistic well and septic feasibility — for power, water, and sewer before assuming a parcel is buildable on any reasonable timeline. This is typically confirmed directly with the local utility and the county environmental health department, not through a public database.

4. Remnants of past mining

California has tens of thousands of historic mine sites, and old shafts, tailings, or waste piles aren't always visible from a drive-by or a satellite photo. The California Department of Toxic Substances Control's Abandoned Mine Lands program tracks known sites and is worth checking for any parcel with a mining-era history, particularly in the Sierra Nevada, Klamath, Mojave, and Colorado Desert regions.

5. Human remains and cultural or tribal artifacts

A parcel's development timeline can change significantly if cultural resources are discovered. The California Native American Heritage Commission maintains the Sacred Lands File and can conduct a records search for a specific parcel as part of standard CEQA due diligence — worth requesting early, not after grading has started.

6. Contaminants and prior site use

If anything was ever built, stored, or operated on the land — even decades ago — it's worth checking for known contamination before assuming a clean slate. The DTSC EnviroStor database is the public tool for cleanup sites, hazardous waste facilities, and enforcement history statewide, and it's the same category of check a Phase I Environmental Site Assessment would formalize.

7. Impact of a new build

Grading, drainage, and stormwater changes from new construction can trigger their own review — flood zone designation, coastal zone rules, or a habitat conservation plan overlay, depending on the county. This is where a civil engineer or land use consultant typically gets involved once the parcel clears the earlier screens.

8. Where the area is trending for highest and best use

Zoning on paper and zoning in practice can diverge — a county's general plan update, an adjacent rezone, or a shift in permitted use can change what a parcel is realistically worth to build. Checking the county planning department's current general plan and any pending amendments is the most reliable read on where an area is headed, rather than relying on the parcel's existing zoning designation alone.

Q: Is raw land or unimproved land easier to get financing on?

A: Unimproved land is generally easier, since it's already closer to buildable — but both are evaluated case by case, and a strong exit strategy can make a raw land deal financeable too.

Q: Does Hanover MC quote a set LTV for land loans?

A: No. Land loan-to-value is evaluated case by case on the specific parcel, its access, utilities, and entitlement status, rather than against a fixed percentage.

Q: Will Hanover MC consider a parcel with environmental concerns?

A: No. Hanover MC does not take on properties with known environmental issues.

Q: Does Hanover MC fund land loans directly?

A: No. Hanover MC arranges private, business-purpose land financing — capital comes from private trust deed investors, with financing arranged under Hanover's California DRE broker license.

Q: If there was never anything built on the land, does the soil still matter?

A: Yes. Vacant land can still have poor bearing capacity, high water tables, or percolation rates too slow for septic — soil quality is independent of whether anything was ever built there, which is exactly why land investors on forums like BiggerPockets treat a soils check as a first step, not an afterthought.

Q: What if there's an old structure, foundation, or debris already sitting on the parcel?

A: It's worth budgeting for demolition and disposal costs and checking whether the prior use leaves any environmental flag — old structures are one of the more common reasons a "simple" land deal ends up needing a Phase I assessment.

Q: Can a protected species on the property block financing entirely?

A: Not necessarily, but it changes the underwriting conversation — the exit strategy needs to account for any consultation, mitigation, or timing restriction the species review turns up.

Q: How do I find out what an area is trending toward for future zoning?

A: Start with the county planning department's current general plan and any pending amendments or rezone applications nearby — that's a more reliable signal than the parcel's existing zoning designation alone.