Financing for Construction on Empty Lot

[Matt Ryan]

Hi,

I have an empty lot that I would like to build on but have some concerns about financing and building. Here is my strategy so far, would like to know if anyone sees any issues.

Based on what I have read, it is almost impossible to get a construction loan because of the construction risk for the bank and that it might be best to do the following:

1. Apply to at least 5 HELOC lenders to get the best deal
2. Build the house
3. Take out mortgage on the new house and pay off the HELOC

What are the bigest risks associated with this?

So far, I have read that rising interest rates are your biggest risk

Thanks

MR

[Andrew Postell]

@Matt Ryan you can absolutely get lending on a lot to build a home.  Sorry that the bank you went to intially told you otherwise.  You have 2 options:

1. A "One Time Close" construction loan. Down payment is based on the ARV of the home but the value of the lot can be factored into the down payment. The one time close does have 2 loans, one for the construction piece and one for the permanent financing but you pay closing costs just one time.

2. Purchasing the home after the builder has finished their work. The builder assumes the lending role for the "construction" piece and ownership of the home goes to you at closing.  Also, closing costs just one time.

I hope this helps with your question.  Thanks!