Will a construction loan cover the cost to buy the land? (mortgage, mortgage)

[bunnny]

Hi everyone,
Is it possible to get a construction-to-perm loan that will include buying a land lot(Yonkers, NY) with let's say 25% down payment, and the balance of 75% to be enrolled in the "construction" loan lien that can be as part of the “perm”? I assume the big caveat here is that any construction costs gets capped with any possible or last minute change orders and/or overruns that will most likely become out of our pocket. So, I'm wondering will the construction loan cover the cost of the land purchase as well or not? Thanks.

[thedwightguy]

probably can be done but with interest rates moving up you'd see ever increasing bills, demands from the finance co., the contractor, and as it gets worth your control would be less and less. Unless you've built yourself before there's no room for a contractor that you don't know well. Too many are really good at spending your money and coming back for more and more.

Custom home builders where I am take less than a year all in to build, sell, and move in. Done. If you take longer than that you're losing money. I'd advise against it as you might lose both your 25% and your credit rating if you don't do it inside an LLCC like most builders, just as a caution.

[Diana Holbrook]

Yes, you can roll the cost of the land in to the loan.... Talk to your lender about how it would all work.

[jackalope48]

One option is to pay cash for the lot and use that as your down payment/cash contribution to the note. That way you aren't paying interest on the lot cost while things are getting built.

[oregonwoodsmoke]

It's possible. Most banks want to do the construction loan and then have you refinance into a traditional mortgage as soon as the house is finished.

I've even talked to one banker who would do an owner / builder loan. That's a rare one.

[BoBromhal]

Originally Posted by Diana Holbrook

Yes, you can roll the cost of the land in to the loan.... Talk to your lender about how it would all work.

FWIW, my answer would be the opposite, assuming I understand the actual question....

Let's say you'll be getting an 80% LTV mortgage of the whole project price/value at the end of construction. Most lenders I know get your 20% upfront, as they should for risk management. So....

500,000 total house cost and value
120,000 lot cost (the 5-1 old saw makes the math too simple)

The Bank wants you to put $100K first (20% of the $500K). So yes, they'll "roll the cost of the land into the loan", but at the original closing, you'll have your 100K in, and the bank only has 20K in. Then there's a construction loan for $400K with $20K on it, and they'll make draw payouts to the builder at certain % completion milestones.