Elementary Home/Land Question

There’s been a couple questions about land/lot loans recently. I just went through this process.

You will simply take out another loan to purchase the land. Depending on the size, cost, and timeline to build, you have options.

Many banks offer a land loan. It is typically done through the mortgage office and shows as a smaller mortgage. LA Land Bank will get recommended, but when I called they had some criteria for the property that didn’t seem suited for me (typically do large properties for hunting, ranching, etc). I went through Neighbors FCU, but also had options of People’s Bank, and Citizen’s Bank and Trust. I’m sure there are plenty of other options as well.

Many require 5% or 10% down, some (Neighbors) did not require anything down. It is typically financed over 12 years. However, if you are planning to start building (not move in/sell, just start your construction loan) within 12 months, you can also choose an interest only loan. This way you only pay interest on the property until you start your construction loan.

Once you purchase the property through whichever financing you select, you will pay on it as a normal loan/mortgage. When you are ready to build, you will take out a construction loan and the first payment at closing will be to payoff the property. This brings the property under the construction loan umbrella and allows it to be rolled into the final mortgage.