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We are begining to build a house starting from a vacant lot, which we’ll purchase from the builder. We want to purchase the lot first so we can delay the start of construction for 6 months.The builder wants 10% of the building costs to start construction on our lot. We have enough cash to put down 20% of the cost of the house and lot which means we need a loan to begin with for the lot and a mortgage loan later for the house. What is the best way to structure the mortgage so that we end up with the final mortgage we want. We’re looking at financing ~$ 376,000 for 30 years fixed. Rates now are about 6%.

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3 Thoughts on Structuring a Mortgage?
  1. Reply
    [email protected]
    May 15, 2011 at 12:31 am

    You can take out a construction loan and then when you need the money for the whole house pay it off with your new mortgage. Use your cash to pay the builder what he wants to start your house and use the construction loan to finance the purchase of your lot.

  2. Reply
    Scott
    May 15, 2011 at 1:04 am

    You’ll have to do some shopping but Probably you’ll start with a vacant land loan then change it to a building loan upon completion of the construction change it to your pr emanate fixed rate loan. Shop around as not all the lender’s are the same…

  3. Reply
    Yanswersmonitorsarenazis
    May 15, 2011 at 2:01 am

    Few construction lenders will let you just buy the land and sit on it for 6 months before building. At least not without extra expenses.

    So you’ll have to get a lot loan first and refinance it into a construction loan when you’re actually ready to get building.

    A couple national lenders that specialize in this are First Horizon and National City. Many brokers can work with them as well, but very few brokers have any clue whatsoever about how to do these, and you don’t really want to be their guinea pig.

    Most major cities have plenty of local banks that specialize in construction financing. Shop, shop and shop some more til you find the best combination of rates/fees/experience. Don’t underestimate experience in that equation.

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