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For those familiar with building homes..
Posted on 8/9/25 at 6:17 pm
Posted on 8/9/25 at 6:17 pm
I own my own lot free and clear.. can I have a contractor build a home on my lot and also fund the build knowing I'm going to buy it once completed.
Im assuming a large non refundable deposit would be required to ensure he knows the deal will go through..
Im assuming a large non refundable deposit would be required to ensure he knows the deal will go through..
This post was edited on 8/9/25 at 6:22 pm
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Posted on 8/9/25 at 6:26 pm to bleedsgarnet
You need to talk to the contractor about that. I bet he needs more than a deposit. Typically you get a construction loan to pay for everything and then roll that into a typical mortgage once everything is done.
Posted on 8/9/25 at 6:36 pm to bleedsgarnet
Construction loan is what you need.
Posted on 8/9/25 at 6:40 pm to bleedsgarnet
Yep. Get a construction loan. Contractor will have you sign a contract stating what all parties involved are responsible for.
Posted on 8/9/25 at 7:47 pm to bleedsgarnet
One time close construction loan. Only close with the bank at the beginning, and a percentage of the contractors fee comes out of each draw. When the construction is complete, and you pass final inspection, the Bank will turn your construction loan into a typical mortgage.
Posted on 8/9/25 at 8:59 pm to Tifway419
Thanks....i was hoping the builder could do it so I wouldn't have to sell my current house first and rent.
I've paid the current house down to just 40k but thats left me without huge amounts of excess cash..
Paying rent for 9 months to a year somewhere and moving 2x in a year just isn't appealing
I've paid the current house down to just 40k but thats left me without huge amounts of excess cash..
Paying rent for 9 months to a year somewhere and moving 2x in a year just isn't appealing
This post was edited on 8/9/25 at 9:10 pm
Posted on 8/9/25 at 9:34 pm to bleedsgarnet
You wouldn’t sell your current home pre-build. Why wouldn’t you want to have the construction in your name?
You mentioned you don’t have excess cash from paying down your current mortgage (nice job btw), so I’m assuming you’re thinking you don’t have enough for a down payment with the bank? Since you own the lot, you could use that value to start.
You mentioned you don’t have excess cash from paying down your current mortgage (nice job btw), so I’m assuming you’re thinking you don’t have enough for a down payment with the bank? Since you own the lot, you could use that value to start.
Posted on 8/9/25 at 9:39 pm to Tifway419
Never thought of it, I guess. The property i bought 2 yrs ago for 72k is now worth 93k..
I think the banker that i'm talking to doesn't know what she's doing
She tells me to sell the house, and that's the best thing to do.
I'm not sure why she's saying that. Because I only owe this 40 on the house. And I own the land in full, and I take home a hundred and fifty thousand dollars a year, and I have no other debt.
I think ill.just wait 3 years til.i pay off my current property in full..
I think the banker that i'm talking to doesn't know what she's doing
She tells me to sell the house, and that's the best thing to do.
I'm not sure why she's saying that. Because I only owe this 40 on the house. And I own the land in full, and I take home a hundred and fifty thousand dollars a year, and I have no other debt.
I think ill.just wait 3 years til.i pay off my current property in full..
This post was edited on 8/9/25 at 9:45 pm
Posted on 8/9/25 at 10:08 pm to bleedsgarnet
Sounds like you need to talk to a different banker
Posted on 8/10/25 at 7:06 am to bleedsgarnet
Most banks do take the land value as collateral. I say most because your situation is quite common. If your bank doesn’t, then you need to go talk to another bank.
No need to wait 3 years if you’re ready now. You also dont pay any principal on the loan during construction, only interest. Once its converted to a mortgage, you’ll begin paying the principal balance down through your regular mortgage payments.
No need to wait 3 years if you’re ready now. You also dont pay any principal on the loan during construction, only interest. Once its converted to a mortgage, you’ll begin paying the principal balance down through your regular mortgage payments.
Posted on 8/10/25 at 8:44 am to bleedsgarnet
quote:
I think the banker that i'm talking to doesn't know what she's doing
Sounds like this is the right answer. Construction to perm loans are typically interest only until the build is complete, as long as it’s completed within the timeline designated by the bank. As other posters have said, get a one time close construction to permanent loan. Sell your house when you’re done with construction. When I was looking, some banks would allow you to put dollars received from the sale of your current home towards the principal of the loan and re-amortize. Not sure if that’s still the case.
Posted on 8/10/25 at 1:30 pm to bleedsgarnet
there are home builders out there that will finance the build…they are usually very low end (DSLD, etc) or very high end (luxury custom builds). However they typically also own the lot. I doubt you will find a builder willing to finance the construction on a lot they don’t own…think about it; if you default they are fricked because you own the lot.
Posted on 8/10/25 at 1:53 pm to cgrand
That's why i was willing to throw down 20k or so directly to the builder.
Who would drop that amount only to default...an insane person..
But, since i own the land i think we will wait 3 years til we pay our last 44k off on the current house.
Price per sq ft probably will go up $25 but interesr rates probably will offset that..
and this house will go up in value at least 15k more in 3 years..
That would give me $275 free and clear after realtor percentage to throw down as a down payment. Plus money i already have ..
Who would drop that amount only to default...an insane person..
But, since i own the land i think we will wait 3 years til we pay our last 44k off on the current house.
Price per sq ft probably will go up $25 but interesr rates probably will offset that..
and this house will go up in value at least 15k more in 3 years..
That would give me $275 free and clear after realtor percentage to throw down as a down payment. Plus money i already have ..
This post was edited on 8/10/25 at 2:07 pm
Posted on 8/10/25 at 3:06 pm to bleedsgarnet
Maybe you don’t budget for 2 mortgages, that’s why she says sell.
No reason you can’t have construction loan and your mortgage if not…
No reason you can’t have construction loan and your mortgage if not…
Posted on 8/10/25 at 6:33 pm to bleedsgarnet
Tilson homes in Texas will do that. No payments are made until the house is complete.
Posted on 8/10/25 at 9:07 pm to bleedsgarnet
I am commercial banker and I have done this a couple times. Basically I would have you as the owner of the lot grant the lot as collateral for the builder. The builder should require a non refundable deposit for special custom work.
I would treat it as a presold house for my purposes. The builder should included in their loan interest carry during the term of the loan.
It is not as risky as it sounds. If for some reason you back out of the house the bank still has the lot as collateral. The builder could turn around and sell the house. They would then give you back your lot cost/equity.
I would treat it as a presold house for my purposes. The builder should included in their loan interest carry during the term of the loan.
It is not as risky as it sounds. If for some reason you back out of the house the bank still has the lot as collateral. The builder could turn around and sell the house. They would then give you back your lot cost/equity.
Posted on 8/10/25 at 9:47 pm to bleedsgarnet
Construction loan with multiple draws is what you need.
Posted on 8/10/25 at 10:34 pm to bleedsgarnet
the problem is…99% of home builders are just that…they are in the construction business not the real estate development business. You are looking for a developer who is willing to take the risk on the arbitrage of the real estate transaction…that’s not a common practice
Let the bank do the heavy lifting if this is the direction you choose…leave the builder out of it
Let the bank do the heavy lifting if this is the direction you choose…leave the builder out of it
Posted on 8/11/25 at 9:03 am to bleedsgarnet
quote:
That's why i was willing to throw down 20k or so directly to the builder. Who would drop that amount only to default...an insane person..
Things happen, and the builder will not simply eat the interest, that will be passed onto you any way you slice it. Builders (good ones anyway) will still require an initial deposit. I’d be careful if not, just seems like a red flag.
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