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Old 07-15-2008, 12:43 PM
 
Location: Between Seattle and Portland
1,266 posts, read 3,105,106 times
Reputation: 1520

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In today's mortgage-mess market, will lenders reject loan applications from average buyers (not investors) wanting to purchase acreage with a teardown outside the city limits, with the intent of building a new home? Obviously, preservationists and neighborhood associations who might object to interference with the "character" of the area wouldn't be a major factor in this kind of decision.

Would the mortgage needed for such a purchase have to be a combo "jumbo" loan, or what? I am in Oregon and would be using a VA loan.

I would be grateful for any kind of feedback that would help me with this idea. Thanks!
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Old 07-15-2008, 04:15 PM
 
28,460 posts, read 80,850,973 times
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You need construction financing. I am almost positive that the VA Loan program excludes construction loans BUT lenders ought to be able to structure a deal where they do some interim financing until the home is completed and they roll that into a loan that will fit with the VA program.

This is far riskier than a normal mortgage, and banks will charge a premium for it. You really need to find the right kind of bank for this too. Even though you want to make this you personal home the kind of oversight that this requires is something that typically comes from a mid-sized bank that does commercial banking or may even specialize in business loans.

Ideally you will have a very big down payment and great credit. It would be nice if you had some kind of a ballpark estimate of what sort of existing home or land you will be buying, what sort of home you will be building and a fairly detailed time line of when this would start and be finished.

This is not a "fill out an application and get a check at closing" kind of thing. You might be wise to talk a mid-sized general contractor or two to at least find out a) which banks are up for this kind of task b) how eager the contractors are to get involved.

If you can get a loan through family/ friends/ business contacts to buy the land outright it could make things a little easier than having to finance the whole deal. This can be a very long and expensive proposition even in an otherwise affordable area. What you are doing, even if you intend to live there yourself, is becoming a developer. That is a risky endeavor at any time and in todays lending climate you need to do everything you can to impress a lender that they will NOT be stuck with some half finished project they they will never get their money out of. Of course if they can get this onto a VA loan their risk is much shorter in term but they won't reap long term benefits either.
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Old 07-16-2008, 03:31 PM
 
Location: Between Seattle and Portland
1,266 posts, read 3,105,106 times
Reputation: 1520
Thank you, Chet! You've given me lots to think about if I pursue this approach to purchasing a home, and I'm grateful that you gave me enough details about the process to ask the right questions of the right people.
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