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When planning to build a home, if you have found a lot you want is it best to buy it and then go...

When planning to build a home, if you have found a lot you want is it best to buy it and then go to the builder or go to the builder and wrap it all into one purchase?  Further, if you do buy it upfront, can the land be used as a down payment?
  • May 03 2014 - Tampa
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Answers (5)

I agree with Mike and Eve, they offered great advice.
Best of luck,
Kari.
  • May 04 2014
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Profile picture for JohnfAvery
You may be able to get the seller of the lot to agree to contingency clause that you will buy the property subject to the builders approval for the house that you want to build on the lot to make sure it is feasible.  The contingency would have a time limit to you, if you can not build the house on the lot, then you could cancel the purchase of the lot.
John
  • May 04 2014
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There are many builders who will build on your lot in the Tampa market. Many have floor plans available, ready for minor modification, so buying the land and then hiring the builder is a viable option. 

There are some lenders who specialize, or have "construction" loans for individuals who are building their own houses, plus the spec builders will have lending resources that they are familiar with. Talking with the builder you select, and also reaching out to your current bank and also some of the local/regional banks will be the best approach to finding out how the financing works. 

I recommend discovering the financing before making the acquisition, simply so the whole purchase can be considered, especially if you want the land used as part of the loan collateral. 
  • May 04 2014
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It sounds like you want to custom build a home...

Financing land is very difficult, so it has to be a cash outlay,  It would be highly unlikely that a builder would be willing to purchase the lot first so that you could get a loan for the lot and new build.

I have never heard of land being used as a down payment unless, it is owner financing, where the rules can be anything agreed to.  Institutional financing would not accept property as a down payment.

Buying land is not simple.  The lot may not be what you think.  Soil testing is a must so that you can see if there are wetlands or if the entire lot is build able.  Then you have to consider the lot prep which in many cases is an additional  hefty cost.  

 Use an experienced buyers agent for both the lot purchase and to find a good builder.

Eve
 
  • May 03 2014
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Profile picture for nwhome.us
If you wrap the builder into the purchase you'll pay the builder a margin on the property. It's a good idea to involve the builder in your decision as to which property to purchase but that is the end of it.

I'm assuming that you are talking about a spec builder who has a design that they build that you like.  Sometimes tose builders work with specific lenders who may be helpfully to you in getting a loan.

No, not many lenders like vacant land as collateral (a down payment) for a mortgage. You will find some lenders (aside form the builder's lender) who will work with you and a builder to finance the build but they usually want to see the land paid for in full and they want a firm contract that can be appraised throughout the building process of the build.

Look for one of those lenders and find out what they need from you.
  • May 03 2014
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