Looking to build a new home and looking for some advice on how to go about it

It’s really just about timing.

Either way, the land will be rolled into the construction loan/mortgage.

If you need to secure the lot now due to a hot market or specific desire, then go get it now. Also, if you want to wait a while to build, buy the lot prior to doing the construction loan.

If you can have a builder lined up and ready to build/complete within a year, do it all at once through the construction loan. Your construction loan is generally limited to a year, along with other restrictions (draws, etc).

You also mentioned cash. Either way the cash is ultimately going toward the mortgage. So from a financial perspective, you’d want the cash earning interest for you until the borrowed money is more expensive than the cost to use yours.

As you are going through the land purchase, start working on your house plans. This phase can take a lot longer than some expect. Once you have your plans, the builders have something to work with. You should also get multiple bids. Home materials are down, but labor is up. As the previous poster said, it’s a crapshoot if you don’t get a rate lock in your construction loan. I would recommend building and refinancing later when the rates are much lower. You can try to wait out rates, but nobody really knows how long it would take before they come down a substantial amount.

Going through this process now. My plan was to buy a lot, sit on it for a couple of years until I was ready to build. Started looking around in 2018 or so and didn't find any that I really liked for the price. Got wind in 2019 of a new subdivision in a great location that was about to go on sale. Found a copy of the subdivision map through City Council Agenda and contacted the developer with my request right before went on sale. I went to a local bank to get a lot/land loan that was 100% financing and 6% for 10yrs.

I sat on it for a couple years and then early 2021 (terrible timing) decided to start looking at plans/contractors. Found some online plans and a couple apps to draw up a Floor plan myself then brought it to a professional to make the full plans. Finding contractors to provide bids around this time was difficult due to the all the issues at the time but finally got 2 bids. Then hurricane hit and I had to pause to take care of damage on my existing house.

January 2022 I selected a contractor, who had to update thier cost. Reached out to some of the banks around town to get ideas on constructions loans. Decided to go with Hancock construction to permanent. It's a one time close and I was able to lock in at 5%. I'll have the option to "float down" (doubtful) when construction is complete. 1st thing they did was pay off the remainder of my lot loan. Broke ground Jun 1st. Hoping to be completed by end of March.

Sounds like you're looking, and as others have said, either way is very do-able.

The old real estate adage is boring, but still holds true...

The 3 Most Important Thing In Real Estate
Location
Location
Location

Find where you want to be (economically and geographically), and then handle the financing/logistics.

You really need to enjoy where you live.

Tell us about the location you have in mind.

Buy the lot, hire an architect, bud it out to 3 builders. Select best value. Make sure you compare apples to apples in terms of specifications bid (vinyl vs clad windows, etc) and allowances given. The cheapest guy likely won’t end up costing you the least in the end. It’s a process.

I may be wrong but if you’re going to buy do take a loan in the building and lot you’ll need all your building information ready. Plans, building cost, builder info, etc to turn into the bank. So take that into consideration if you’re not ready.

We bought our lot cash and used that as leverage with the building loan. This was mainly due to finding an ideal lot and sub contracting.

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A builder who already has a lot can complete the house much faster than if you started off at square one with just a lot.

I got a lot loan, and the bank told me that it will be no issue to roll over the lot loan to a combined new construction loan if needed. I paid the lot off already.

When it comes to new construction, patience is a virtue.

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Thanks. These are some things I need to consider. I have a couple of builders in mind and don't have an issue with it taking a long time. I have a rental where I just extended my lease a year.

House I'm looking at building will probably be in the low 300s. Looking to downsize compared to my previous house that would probably go for a little over 400K right now.

Bad thing is I'm going to have to pay more to get the smaller house I want to build than what I paid for the bigger one initially

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January 2022 I selected a contractor, who had to update thier cost. Reached out to some of the banks around town to get ideas on constructions loans. Decided to go with Hancock construction to permanent. It's a one time close and I was able to lock in at 5%. I'll have the option to "float down" (doubtful) when construction is complete. 1st thing they did was pay off the remainder of my lot loan. Broke ground Jun 1st. Hoping to be completed by end of March.

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We did a very similar thing. Locked in sub 5% in March 2022, one time close with Hancock, broke ground in May 2022 and moved in Dec 23rd 2022. Going through loan modification now. I wouldn’t count on being able to float your loan down though.