Doing a web search on construction financing or talking to a broker should give you some idea’s. I’m sure this varies area to area, but where I am, it’s typical to fund up to 80% of the cost, interest rate is usually around prime for your primary residence (assuming good credit), or prime+2% for an investment property. Different companies have different schemes - your worst case is 3 closings (close on the lot, then close on the construction financing, then close on the permanent mortgage). The company I work with allows a single close, which saves significant fee’s, but you have to have the plans etc drawn up before the lot is purchased.
new construction - advantageous terms? - Posted by Lin (OR)
Posted by Lin (OR) on September 13, 2004 at 16:01:24:
I’m looking for suggestions about how to structure the financing of some land (4 ac) that I’m planning on building my primary residence on.
I am buying a lot from a builder who has access to a private investor (friend) who is willing to fund 1) the purchase of the land, or 2) the purchase of the land and construction of my home. I would refinance upon completion of the project.
I am unfamiliar with construction financing, and I am struggling to put together a loan proposal outlining the terms I’d like. Part of my difficulty is because I don’t know what’s customary. I can qualify for conventional financing, so one of the advantages of this private lender is expediency.
I know this is pretty vague, but I’m hoping to get some idea about what kind of terms I should ask for that would be better than I could get from a conventional lender.