Land purchasing questions

[Jarrett]

My wife and I are looking at buying some land, 2-5 acres (more if possible, but land here is outrageous). Our intentions would be to put a mobile home on it and in 10 or so years build our house. If we were to purchase the land and finance it longer than the 10 yrs. (say 15 or maybe 20), would we have to wait until the land was paid off before we could get a construction loan to build a house?

 

[anojones]

I don't think the land would need to be paid off to get a construction loan to build. You would have to still qualify for the construction loan and having debt (i.e. the land loan) would limit your credit, but depending on your income, other debts, credit rating etc you should be able to get a loan to build. We did our place as a land/home deal- a bit more complicated to sort out but it worked. We wanted to put up a manufactured home, but we couldn't find a bank to lend to us at reasonalbe rates, so ended up going stick built.

 

[Sigarms]

Short answer would be yes, but as stated here, most likely will depend on your credit.

When my wife and I were looking for a new house with land, I applied through a federal credit union, and they gave me more than I thought I could afford.

When we found a house with with 8 acres (with an option to by another 32 acres with the house), we ended up going through a farm credit union. We bought the house with 8 acres, carried two house payments for a short time until we could sell our old house, then applied for a second loan for the rest of the land (we were told before hand that we could do this with the two loans). We did put a down a payment on the additional land and had a year of the purchase date of the house to apply for the land as well.

Bottom line is that we didn't want the house will all the land and a second house payment, thus the reason for "spliting" the loan for the "new" house and additional land.

We were surprised how competitive the farm union was, was a very pleasant (sp?) experience, and the realtor, laywer and farm credit union rep all knew each other and worked with us very well.

You may want to check any local ordinances/zoning (sp?) to verify that you can place a mobile home in the area that your looking at.

 

[EddieWalker]

Allot of it depends on your credit rating and your relationship with your banker. Some banks will let you buy with 20 percent down and 15 years financing. If they don't know you, raw land might require 30 percent down.

Once you have the land, it's easier to secure financing for building on it. Most moble home dealers will get you the financeing if you have the land. They don't care about what you own on it or even what you make. They charge crazy rates, have all sorts of fees and expect to repose a new moble three times.

Good luck,
Eddie

 

[sneaky_pete]

+1 on the Farm Credit Associations. When we wanted to buy more (vacant) land, the conventional mortgage companies and brokers didn't want to mess with it, I guess they get all the business they want from conventional homeowners (and we have excellent credit BTW). The FCA knows about vacant land and rural living and was anxious for our business. The interest rates and available terms are different than conventional home mortgages, but very flexible.

 

[MossRoad]

When we bought vacant land, we already owned a small home outright. To get a mortgage for vacant land, every lending institution wanted 25% down. We did not have the 25%. However, one local bank helped us by suggesting a blanket mortgage. We already owned a small home in town. We tied the house that we owned together with the land. With those two added together, we already owned 2/5ths of the total value. We were able to purchase the land with no downpayment and only mortgaged 3/5ths of the total value. It worked out well.

So well, that when we bought a 2nd house, we did a blanket mortgage and tied the first home to the value of the second home. We ended up owning 1/3 of the total value and again, needed no downpayment. The only stipulation was that as soon as we sold the first home, we had to turn over enough $$ to the bank to keep over 25% of the equity in the 2nd home. We dumped it all on the loan and brought the equity to a little over 50% of the 2nd house. So we only had a mortgage on 50% of the value of the 2nd house and we owned the vacant land outright.

It worked well for us. It was suggested by our local Farm Credit Services. They didn't handle those kind of transactions, but they were the ones that suggested the financial institution that did it for us.

 

[MikeIA]

I took out a home equity loan on the house in town that I was living in to buy the lot for the home where we live now. The fact that I owned the lot free and clear made the bank happy when I went in for the construction loan.

 

[Highbeam]

I have a mortgage on a small home in suburbia. I took out a home equity loan to make the 20% downpayment on my vacant land. I called to get setup for a construction loan to build a home on the vacant land and then sell the suburban home. I was told that it is standard to use the construction loan is to pay off the land. The whole point of a construction loan is to build a home on land so why not use it to buy the land from yourself? It's just another cost.

 

[KentT]

I also used Farm Credit Services to buy my rural property, and will be "wrapping" the remaining balance I owe on it into the construction loan. They'll do it either way -- it's just that now I'll have to pay closing costs twice.

However, they will also consider any "improvements" I've made to the land (clearing, driveway, well, etc.) since I've bought it as part of the equity, since they will also have the land appraised again when I take out the construction loan. So, you can build "sweat equity" in land, also.

It's SO VERY nice to deal with someone who understands rural property, and their rates are competitive....

Also, I'm not sure if its the same where you live, but some states look at mobile/modular homes quite differently if you remove the axles and put them on a permanent foundation ... this might also play into how the banks/lending institutions deal with you...

 

[Bird]

Jarrett, I'm sure it's different in different places, but my brother bought 10 undeveloped heavily wooded acres a few years ago with a minimal down payment and allowed the company selling it to finance it. After we spent our weekends for a few months clearing a trail around the perimeter, and clearing a place to build a house and driveway, he applied at a local bank for a construction loan for him to build the house himself (with a couple of brothers to help). He drew his own blueprints and all. The bank was quick to approve the construction loan, to be rolled over into a conventional mortgage upon completion of construction, but they required him to have clear title to the land first. Fortunately, that was not a problem to pay off the land.

 

[Sigarms]

</font><font color="blue" class="small">( I also used Farm Credit Services to buy my rural property, and will be "wrapping" the remaining balance I owe on it into the construction loan. They'll do it either way -- it's just that now I'll have to pay closing costs twice.

It's SO VERY nice to deal with someone who understands rural property, and their rates are competitive.... )</font>

Can't say it any better. Know my loan officer by first name, they call me when ever they see a used tractor for sale (they know I'm still looking for one), I'm invited to the company picnic every year, and they all seem like good down to earth people. Most pleasure I've ever given all my money to /forums/images/graemlins/grin.gif

Serious, not a bad moment yet in dealing with my local farm credit union.

 

[thatguy]

I think everyone here about covered the subject very well.. We bought our land using a home equity loan, which worked out better because it gets to counts as part of the down payment/equity for our new home construction..

From what I understand from talking to different bankers, banks do have a limit on the number of acres they like to finance with little hassle.. Once you get over about 15 to 20 acres it becomes farm type land (for lack of a better term) versus a home building lot and they are more hesitant to want to go there (ie more downpayment needed)

good luck

Brian

 

[theonlybull]

i just put in a bid on a peice of land, adjacent to my current property, and after talking with my bank, walked away with a nice personal line of credit... i didn't want to tie my house into the loan, and this offered as good a terms as anything.

 

[TC18guy]

Our loan was kind of interesting. We had quite a bit of equity in our old home. The bank did some kind of "bridge" loan where they took over the mortgage for the old house and didn't require us to make any payments on it for 9 months giving us plenty of time to build our new house. We then got a construction loan with the same bank, purchased the land, built the new house. We sold the old house before the 9 months were up and rolled the construction loan into a shiny new mortgage. Not having to make payments on the old house sure made the construction go easier. I don't hink we could have made both payments.

 

[deere755]

I would think the equity you would have in the land would be ok to start building a house with. After the house was finished they would do a new appraisel with the house and land and if you had 20% equity in the appraisel you would have your down payment met and would not require PMI insurance. With our house they did an appraisel after the consrtruction was finished and it was 30% higher then our mortgage so there was our down payment. Our bank required us to have PMI insurance if we did not have 20% down. Our construction loan also included the price of paying off the land. Our bank required us to have a clear title to the land to start construction.

 

[JAK]

you can do a land - home package on a manufactured home. go with a good company, not a fly by night mobile home dealer. we bought our land first, then debated on what to build. my wife and i decided on a palm harbor home. with the price per sf of a stick built house it just wasnt worth it to us. its 2400sf, we got to decide the outside elevations and colors, and did several custom upgrades to the inside. they dont have craxy rates and hidden fees. your rates and terms depend on your credit history. they have regular rates just like any other mortage company loans. we did the pier and beam foundation, which makes it a permanent structure and qualifies for a f h a loan and makes it alot better setup. $ 69,000.00, you cant go wrong on that much footage. we rolled the land and home together for 20 years at 5.85%. you do see the mobile city appear overnite and a year later they are all repoed and looks bad, these are shady dealers that put people in them that couldnt afford them anyway, stay away from them and go with a reparable mortage company and builder.