As my credit repair journey speeds towards its joyous conclusion with me having learned some very valuable lessons and resolving never to repeat the behaviors of before, I find myself wanting to set my family up with a nice homestead. Here is my question: Early next year I want to purchase a 3-5 acre lot, and build a custom or semi-custom home. Can anbody recommend a national or regional (California) lender that specializes in lot purchase and construction loans? I know that there are several programs where you pay interest only on two seperate loans (one for the land, one for the construction) and then when everything is done the loans are refinancing into a single mortgage. Beyond that, though, I know very little, including who makes these kinds of loans. Thanks for your advice, HDAlex
I can't recommend anyone in CA, but there are also one time close loans that are for new construction. It depends somewhat on the timing. Are you going to buy the land and build within a short amount of time? Or sit on the land, and build at some future date?
Jlynn, I'm looking at either option, depending upon the financing. While it might be better to let the land appreciate for a bit, I am an impatient lad and want to get moving. I hope and expect that I'll be able to get financing to buy the lot and build all at the same time. If that's the case, that is almost definitely what I'll choose to do. If, on the other hand, I can only qualify for a lesser amount, we'll probably pay for the land with cash and a loan from my father in law (which we are loath to accept for all the obvious reasons). -HDAlex
We financed a bit more than an acre in Bel Air mid-last year, and went through IndyMac Bank for a land loan who is headquartered in Pasadena (Los Angeles area). Although there were some definite hurdles to overcome, our rep Ed Rogers was fairly competent despite his short amount of time working in the Construction Lending department. Be aware that every lender we spoke with required 25%-40% down for construction and/or land loans, plus typical closing costs. Another hurdle that may or may not be applicable is the fact that in order to issue a construction loan or all-in-one loan, all architectural plans must be pretty done and set, so getting an all-in-one loan is sometimes a bit of a challenge if you are planning a nice custom home on a difficult building site. Then again, if you already have arch. plans, are using a "plan from a book," or there is a lot of flat land in your area, that may not be as much of an issue.
You may get some really good advice by posting on www.interst.com/badcreditok/credittalk.shtml Charles is wonderful at telling people how to qualify and what they would qualify for. Hope it helps!
I forgot to mention that the "interest-only" deals are pretty worthless; if you actually take into consideration the amortization rate of the first few years of any mortgage, you aren't getting much of a discount by not paying the regular principal + the interest payment. The amount we pay to principal every month at this point is only about 7% of our actual P&I payment, so getting that 6%-7% off by paying interest-only is minimal help if you hold it against the entire payment. In a nutshell, it's not like you'll pay a flat 7% loan rate for interest only (~$100/mo) for a 500K/30yr loan until you're finished and ready to convert to conventional, instead you'll pay ~$3000/mo, as opposed to the $3400 for P&I you'll pay after consolidation. It's just that none of that payment goes towards your principal, so you are essentially getting a $400 discount for not paying any principal, which seems fairly minimal on a $3000 payment.
ytroy, I think I've got it easier than Bel Air. We live out in the Antelope Valley - where land is cheap and flat and all the parcels are nice neat rectangles. Not only that, but the cities out here are very pro-development and bend over backwards to make the process as easy and inexpensive as possible. Regarding the down payment - I called around today and was told by one local broker that with a median score above 680, I could qualify for a construction loan at 90% LTV. She said she'd have to get back to me on the land purchase. Perhaps we'll look for an owner willing to carry his or her own paper - seem to be a lot of those out here.
Talk about great timing! Heard an ad on the radio today for the "Builder's & Remodelers" Expo next week at the LA Convention Center. If past experience is any indication, there will be MANY lenders offering exactly what I'm looking for. Now, if only I can find a way to roll that 50" plasma into the mortgage costs... LOL. -HDAlex
