My wife and I are looking to buy some family land and build a house. The land is worth 80k+ but we will purchase for 40k giving 10k to each family member that currently owns it. My question is, can we purchase the land separate and then turn around and use the equity for the down payment for an interim loan to build the house? We would then refinance the land and home together once the house is completed. I'm dumb when it comes to this stuff so any help is appreciated.
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Yes, you can secure the land and then obtain an interim construction loan and utilize your equity on the land. A new appraisal will be ordered for the home to be constructed (based on plans, specs, and cost breakdown) and your bank will most like want to be at a max LTV, loan to value, of 85-90% of the overall value.
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Yes it does! Does it matter if there is already a house on the property that is not in a livable condition?Originally posted by Deer Tamales View PostComment
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You can use the land as collateral on a loan but each bank has a ratio they will use to determine the amount you can borrow based on the value of the land, mortgage amount needed, and your credit. If you have equity but still owe on the land, they will factor that debt obligation into your ability to borrow and adjust the ratio accordingly. You just need to sit down with a lender and go over options. They will use a market value multiple or LTV ratio to determine how much you can borrow.Comment
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Should be more than doable. Word of caution, some lenders will do a second credit evaluation when the construction loan modifies to mortgage. Lost job, other issue and you could lose your land. Try to find someone that will do it all in one.
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Went two three banks this morning with no luck. They couldn't give me much info or didn't seem to know what they were talking about. Finally found a Heritage Land Bank in Greenville who seemed to know what they were doing. Going to see them tomorrow!Comment
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Would you say it gives any value to the property? You should be fine.Originally posted by UncleBubba View PostComment
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I just did this. I had a construction loan through First United in Bonham. I am not the most savvy on all of this stuff as well so I just trust my banker. He is a friend of mine that I hunt with. Some how I paid less interest by using the construction loan to buy the land and then used the cash I was going to by the land with to pay for some of the build. I will PM you is contact info. First United is super easy for builds.Comment
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