Looking at purchasing 20 acres and building a house on it.

What would be the best way to go about financing the land and the new construction?

Can it be done together or would we need to get separate financing for each?


Also we will have to sell our current home to come up with the 20% down.

Would we have to have 20% on the land and 20% on the home if they were separate?

Call Ramsey. (once he get's back from fishing in Venice)

You should be able to get a construction loan for the land and build then convert to a regular mortgage.

What if we wanted to take out the 20% for the land down payment in a home equity loan and wait to build??

Is that a possibility?

We have at least 3 times the down payment in equity in our current home.

We had to move twice when we built. Our old house sold before the new one was done. I bought the land first.

Yes you can use equity from the land to use as a down payment for the house but obviously you have to have x amount of equity in the land. I just went through all of this finalized my mortgage in June. First you buy the land venue get with a builder or whatever you going to do get all your budgets together for your construction loan however much you want to put into the equity from your house or whatever you're going to and then you're going to have closing cost for the construction loan you get through the construction loan you're going to pay an interest-only payment every month with the amount borrowed for the construction loan so the later in construction you get the higher your monthly payment is for your construction loan. then you rolled into a mortgage the put your house and your land together some people separate and just put their house on like an acre or two and mortgage it separately in case they ever want to sell or getting some hard times their lands paid off or it's a separate note and you lose the house.

Yes you can use equity from the land to use as a down payment for the house but obviously you have to have x amount of equity in the land. I just went through all of this finalized my mortgage in June. First you buy the land then you get with a builder or whatever you going to do for your house, get all your budgets together for your construction loan. however much you want to put into the down payment for your house goes into the construction loan and you use your money first. You're going to have closing cost for the construction loan you get through the construction loan you're going to pay an interest-only payment every month with the amount borrowed for the construction loan so the later in construction you get the higher your monthly payment is for your construction loan. Then you roll it into a mortgage (with a new loan so obviously additional closing cost) with your house and your land together some people separate and just put their house on like an acre or two and mortgage it separately in case they ever want to sell or get in some hard times their lands paid off or it's a separate note and you lose the house.

Edited out some of my jiberish but I guess the edit window had expired

That's fine, you'll just have to disclose that the 20% down is borrowed. Should be a non-issue.

Just do it. You will think you have died and gone to Heaven,

Just remember you'll have to show the ability to service the debt on your original 1st lien loan, the home equity loan and the new loan. Most lenders will assume the worst scenario-that you don't sell your existing house and you have to carry both homes. Also, home equity loans are limited to 80% of appraised value so all of your equity is not available to borrow.

Put your house on the market. Sell it. Buy the land and camp out there while you build.

If it was just my decision I'd probably do it.

We decided to not take out any type of loan for the down payment and are going to just save up and buy it.

The property is not listed but is a friend's and they aren't actively looking for a buyer.

Should be able to have the down payment in 8-10 months and then we can take our time on getting things in place to build.

All the while our equity on our current home will continue to grow.

This is what I did on my place. I found a reputable builder with good credit 1st. Granted I had enough "cash" to buy my land outright, so that was my "down payment". He bought the lots, with my down payment of course, built the house, then sold me the package under 1 loan.

Believe me, there is a ton of work to do to the land before it is ready for a house. Get the land early, and get those things done before the house is to be built. Utilities, driveway, culvert, brush clearing, dirt work, septic system, and the list goes on.

We bought our land in 2013, and used Lone Star Ag Credit for the land loan. Last month I went through my bank for the home construction loan. And rightfully so, they wanted the homestead acreage to be declared paid for. I followed the bank's rules, and marked off the portion of land that will be homestead, then had it surveyed and drawn. That had to go to Lone Star to get them to release it. For my scenario we were cutting out 5.6 acres out of 70 acres. Fortunately, I owe so little on the 70, and my value has incresed so much, it was not a problem.

Bottom line, get the land as soon as you can. Get work done, and set up some temporary living quarters. Fence and gate it. That is the first layer of security. Building my shop as early as I could is the cornerstone to how much easier life will be while building the house (I'm the builder) and it will be a place to stage cabinets, materials, furniture, ect. And I do have living quarters there as well.

Excellent timing, exactly what I am wanting to do.

If you can find a piece of land with a home already on it I think you can save a bundle of money, but then you don't get to build your own.

Just for comparison sake. Looked at a house on 20 acres 2700 sqft nice home on a State hwy. The house was bigger than I wanted and we passed on it. It sold for 425k.

20 acres of land in that area would easily bring 200k more than likely 250-300k just for 20 acres. If you were to buy the land for 275k it would cost you another 300k+ to build a comparable house as to what was on it. Just something to think about.

I had to obtain a loan to buy the land. Then I had to get a construction loan to build the house. When the house was completed, both loans were rolled into a single mortgage.

Something else to consider is if you can keep the land and home financed separately it would allow you to pay one or the other off and shrink your monthly obligation(payment) without the cost/headache of refi'ing.

Not usually an option. Who's going to give you money to build a house on land that can be foreclosed on?
He'll probably either have to own the land out right or have it rolled into the construction loan.

Our accountant told us, "if you want to own one free and clear, pay off the house. On the ag land, just run the payments out until it's done."