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Construction Loans - Bizarre

- I was talking to Wells Fargo and they won't do a construction loan for land you live on.
- However, if you don't live on the land they will. What is the risk difference?

We live on a lot in a neighborhood where the tax assessment for the land is $480,000 for the land alone and we want to tear down our old home and build a new one. Wells Fargo suggested I check with a friendlier local bank (yes they said that). Do you know of any construction loan friendly Houston banks. I know one of them claims to be.
Thanks,
Scott
  • June 25 2012 - Houston
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Answers (2)

Here's a little more to consider. Construction loans that involve tearing down an existing structure, only to replace it, have always been some of the hardest to bring to fruition successfully. That is the essential risk difference. Lenders know, from experience, that these type deals disintegrate more often than others, for numerous reasons, and hence, they are hesitant to entertain these scenarios, at all.
  • June 25 2012
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Profile picture for AndreaSmolin
It would be best to talk to a lender about it but I think its because there are two different types of construction loans: a construction to Permanent loan vs a two time close loan.

This website does a good job of explaining the difference.

If you do a basic google search you should be able to find some results for local lenders in your area. Here is one that says they do both types of contruction loans.

From personal experience it does seem that local banks have more offerings and flexibility when it comes to construction loans.

  • June 25 2012
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