Post # 1
We have been looking at buying land to build and trying to talk to someone about getting a construction loan here soon but I am curious how much of a construction loan you got approved for? I heard its harder to get because its a loan for something that isnt there yet. I would like to know like how much compared to a normal mortgage loan or in comparison to your year salary (if it is double your yearly, triple, ect) Thank y’all!
Post # 2
We bought land and will be building next year. While I can’t answer what we have been approved for because we haven’t tried I can say that I don’t think the reasoning you have been given is the reason why it’s harder to get a construction loan. I imagine the reason people have problems getting construction loans is because the downpayment required is significantly higher and most people can’t come up with that money easily. A issue that may stem from that reason is if you spend more money building than the house is worth when it is appraised to be converted into a mortgage. If you don’t have the cash to cover that gap you’re screwed.
One thing to think about… it may be cheaper to buy your land and wait to build. We looked at both options and realized that we would save a lot of money by paying cash for our land. Instead of having a land loan of 200k and adding a mortgage for a new build on top of that we will finance a lot less. In general we will be in the perfect spot to take on a mortgage because we will not have any debt. That makes financing easy. Our downpayment is specifically for the house and we won’t have to worry about land costs. That means that even though we want a smaller house in a big neighborhood we won’t have an issue with the appraisal. As much as we wanted that house now it made more sense to not take a land loan and convert to a construction loan and then convert to a mortgage.
Post # 3
Congrats! Building is defnitly a dream of mine!! That may be true I just have always heard that. We have been saving for a little over a year and have enough cash to buy the land outright right now. Granted most of our cash will be taken away so as far as having cash for a downpayment on the house would be low. I always heard to use the land as lateral for downpaymetn but I just didn’t know if this is the best option. I guess I might need to do a litte more research.
Post # 4
We totally weighed our options. Taking on a land loan meant we wouldn’t be able to save as much each month towards the actual house. And then we would pay interest on it. And then it was a smoking hot deal if we didn’t get it we would have beat ourselves for it and we were in competition, so we thought the all cash offer would be more appealing. And then the typical time frame to convert a land loan to a construction loan is two years, so we may have felt rushed.
Do I miss that money? Eh, no. It’s the only area in the city zoned for agriculture and with full acre lots… without an HOA. In the year we’ve had it I have watched the last of about 15 lots be scooped up for about 100k more than we paid for ours and ours is a great lot. It’s a great investment. Because we don’t have debt our savings power is crazy. Time goes by quick. We’ll build before we know it.