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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Question about Mortgages?
Does anyone know if you can get a mortgage to buy land and build a house? I think the answer is no, but I just wanted to check!
What would I have to do if I can't get one? Take out loans??
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Posted 3/7/06 10:09 PM  |
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HarleyGirlFLA
Come on in
Member since 5/05 9674 total posts
Name:
Mel
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Re: Question about Mortgages?
I am not sure about a mortgage but you would probably have to take out a personal loan of some sort as the land owner will most likely want all the funds up front. We were very lucky when we purchased our lot we were dealing with an investor and did not have to take out a loan. We signed a contract with him and sent him monthly payments. But our lot 4 years ago was a lot less then what land is going for now in my area.
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| Posted 3/8/06 12:04 AM |
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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Re: Question about Mortgages?
The lot is owned by my in-laws, so we could probably work something out in terms of payment, etc.
Just concerned about building costs - all that.
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| Posted 3/8/06 6:41 AM |
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JennChris
life moves fast
Member since 5/05 4225 total posts
Name:
Jenn
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Re: Question about Mortgages?
You could get a Construction Loan and you just pay any construction costs from that account and then at the end you close on the final amount of the construction of the home.
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| Posted 3/8/06 8:20 AM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Question about Mortgages?
Posted by JennChris
You could get a Construction Loan and you just pay any construction costs from that account and then at the end you close on the final amount of the construction of the home.
Pretty much what she said. People take mortgages out on land all the time.
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| Posted 3/8/06 9:23 AM |
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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Re: Question about Mortgages?
Posted by JennChris
You could get a Construction Loan and you just pay any construction costs from that account and then at the end you close on the final amount of the construction of the home.
Thank you so much for that link! Just so I understand correctly - if I am approved for a 200,000 loan and when everything is said and done, it costs 150,000 to build the house - I will be charged based on the 150??
Pill - I had always heard that you couldn't get a mortgage on just land because there is no house/structure - I'm glad to hear otherwise. Do most banks do this - or do you go to a regular mortgage broker?
Much thanks!
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| Posted 3/8/06 6:01 PM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Question about Mortgages?
Posted by mrswask
Pill - I had always heard that you couldn't get a mortgage on just land because there is no house/structure - I'm glad to hear otherwise. Do most banks do this - or do you go to a regular mortgage broker?
Much thanks!
Maybe you can't get a mortgage... but you can most certainly get a construction loan from what I know. I may not be 100% sure though. I do know construction loans carry higher interest rates than conventional mortgages.
I am not sure where to get the loan though.  Try calling around and ask for a construction loan to buy land.
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| Posted 3/8/06 6:07 PM |
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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Re: Question about Mortgages?
Posted by DjPiLL
Posted by mrswask
Pill - I had always heard that you couldn't get a mortgage on just land because there is no house/structure - I'm glad to hear otherwise. Do most banks do this - or do you go to a regular mortgage broker?
Much thanks!
Maybe you can't get a mortgage... but you can most certainly get a construction loan from what I know. I may not be 100% sure though. I do know construction loans carry higher interest rates than conventional mortgages.
I am not sure where to get the loan though. Try calling around and ask for a construction loan to buy land.
Thank you - it would figure that interest would be higher. I have almost perfect credit though, so hopefully that would come in handy. So, as far as you know - a construction loan would cover both the land and construction?
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| Posted 3/8/06 6:09 PM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Question about Mortgages?
Posted by mrswask
Thank you - it would figure that interest would be higher. I have almost perfect credit though, so hopefully that would come in handy. So, as far as you know - a construction loan would cover both the land and construction?
Don't quote me on this....
But the way construction loans work... they are done in "phases". I think there is a better term for it.
You will take out XXXX amount for the land and the initial construction (studs, framing, etc.).
Then the builder typically finishes that... paperwork gets done with the town for approval... then you get more money added onto your construction loan for the next "phase" (which may be sheetrock, some initial tiling, roof, etc.).
Then they get approved... etc etc etc... then you get more money added onto your loan for the finishing phases.
Once the house is "done"... then you get a real mortgage with a real interest rate which pays off the construction loan.
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| Posted 3/8/06 6:12 PM |
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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Re: Question about Mortgages?
Posted by DjPiLL
Posted by mrswask
Thank you - it would figure that interest would be higher. I have almost perfect credit though, so hopefully that would come in handy. So, as far as you know - a construction loan would cover both the land and construction?
Don't quote me on this....
But the way construction loans work... they are done in "phases". I think there is a better term for it.
You will take out XXXX amount for the land and the initial construction (studs, framing, etc.).
Then the builder typically finishes that... paperwork gets done with the town for approval... then you get more money added onto your construction loan for the next "phase" (which may be sheetrock, some initial tiling, roof, etc.).
Then they get approved... etc etc etc... then you get more money added onto your loan for the finishing phases.
Once the house is "done"... then you get a real mortgage with a real interest rate which pays off the construction loan.
ahhhhh - so at the end - now that you have a house - you can take out a mortgage to pay the loan? I'm not quoting you, but this is definitely stuff to think about!! Much thanks for your help!
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| Posted 3/8/06 6:18 PM |
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DjPiLL
Member since 5/05 3664 total posts
Name:
Richard
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Re: Question about Mortgages?
Posted by mrswask
ahhhhh - so at the end - now that you have a house - you can take out a mortgage to pay the loan? I'm not quoting you, but this is definitely stuff to think about!! Much thanks for your help!
Yeah... people that have houses built from scratch have to take out a construction loan... and then it gets converted (like a refi) to a mortgage one the house is there.
It happens this way because no bank will give you the full blown money up front if there is no house there. They also want you to start paying interest the minute you sign the papers for the land and they break ground. And since it is a "work in progress" and there is no house there yet... its a "riskier loan" so the interest rate is higher.
I also don't think you have to get your construction loan and your mortgage in the end from the same bank either. There are probably banks or financial institutions out there that specialize in "construction loans".
AND... if someone buys land from a builder... you can also get your construction loan through the builder's bank. The benefit of this is... the builders get paid quicker and there is less of a "lapse" in between phases while you are waiting for the bank to fund the cash to the builders. If you go this route though... make sure you get a good interest rate. I heard some builder's financing plans kinda suk.
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| Posted 3/8/06 6:28 PM |
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mrswask
Pookie Love
Member since 5/05 20229 total posts
Name:
Michal
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Re: Question about Mortgages?
Thank you very much!! Makes perfect sense about it being riskier for the bank since nothing is yet built!!
Now - do you know how much it costs to build??? C'mon - you know all the other answers to my questions!
Thanks, Pill!
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| Posted 3/8/06 7:25 PM |
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HarleyGirlFLA
Come on in
Member since 5/05 9674 total posts
Name:
Mel
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Re: Question about Mortgages?
Posted by DjPiLL
Posted by mrswask
Thank you - it would figure that interest would be higher. I have almost perfect credit though, so hopefully that would come in handy. So, as far as you know - a construction loan would cover both the land and construction?
Don't quote me on this....
But the way construction loans work... they are done in "phases". I think there is a better term for it.
You will take out XXXX amount for the land and the initial construction (studs, framing, etc.).
Then the builder typically finishes that... paperwork gets done with the town for approval... then you get more money added onto your construction loan for the next "phase" (which may be sheetrock, some initial tiling, roof, etc.).
Then they get approved... etc etc etc... then you get more money added onto your loan for the finishing phases.
Once the house is "done"... then you get a real mortgage with a real interest rate which pays off the construction loan.
Yes. Generally that is how a construction loan is done. Each time something is done or will be done money will be taken from the loan. A construction loan has a higher percentage and a lot of builders are not real fans of dealing with construction loans only because they cant do their job unless they have the money. With a mortgage in construction the bank will pay for everything in the beginning knowing they will get their money back from the owner when the job is complete.
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| Posted 3/8/06 9:01 PM |
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HarleyGirlFLA
Come on in
Member since 5/05 9674 total posts
Name:
Mel
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Re: Question about Mortgages?
Posted by DjPiLL
Posted by mrswask
ahhhhh - so at the end - now that you have a house - you can take out a mortgage to pay the loan? I'm not quoting you, but this is definitely stuff to think about!! Much thanks for your help!
Yeah... people that have houses built from scratch have to take out a construction loan... and then it gets converted (like a refi) to a mortgage one the house is there.
I have had a house built from scratch and had absolutly no problems getting a mortgage. A construction loan never even came into question. It was all about a mortgage.
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| Posted 3/8/06 9:03 PM |
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charon54
My two boys!
Member since 5/05 7279 total posts
Name:
Rebecca
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Re: Question about Mortgages?
DH is a bank manager for Wamu and he said you can get a mortgage for land, but it is really difficult. I thought that sometimes the builders of the home have a mortgage company that they work with to finance for them.
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| Posted 3/8/06 9:14 PM |
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HarleyGirlFLA
Come on in
Member since 5/05 9674 total posts
Name:
Mel
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Re: Question about Mortgages?
Posted by charon54
DH is a bank manager for Wamu and he said you can get a mortgage for land, but it is really difficult. I thought that sometimes the builders of the home have a mortgage company that they work with to finance for them.
Most builders do have a mortgage company they work with.
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| Posted 3/8/06 10:09 PM |
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