Financing in 78702>Question Details

UTHorn, Real Estate Pro in 78759

Financing for land/contruction

Asked by UTHorn, 78759 Mon May 5, 2008

I found a property with a house that is uninhabitable so I'm basically paying for the land. The sales price is a bit higher than the TCAD land appraisal. I hope to build which would increase it's value. Do I have to get special financing for this project? Would I have to get a construction loan to acquire the property since I can't live there til the house is built? What are typical rates on a construction loan? Thanks.

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I'm not sure what the TCAD appraisal has to do with your considerations. Appraisal districts typically have property on their tax rolls below market value.

I hope you are aware that there will be a cost related to removing the uninhabitable structure. Were I to offer to buy the property, I would require that the seller remove it, and offer no more than the value of the land plus the added value of any utilities in place.

As for your financing options, you will need interim financing while you build. There's nothing typical about rates or terms. Your best info will come straight from a lender. Shop around. Talk to your bank first, and then with a mortgage banker/broker.
1 vote Thank Flag Link Tue May 6, 2008
Construction loans, like other loans, are factored heavily by the borrowers credit score. You will probably find financing in the upper 6's to low 7's This type of financing is a bit harder to find, right now, with most lenders looking for more "conventional" loans. . However, I have found that many smaller banks are still working with qualified borrowers for "out of the box" solutions. The key is in packaging your proposal in a professional manner, so that the underwriters have a good handle on what you are seeking to do. I would make sure that you include a value, based on area comparables, of your finished project. It would be best if your project shows an equity position at it's conclusion of at least 20% Good luck with your project!
0 votes Thank Flag Link Mon May 12, 2008
Ann - great questions as you contemplate building. It sounds like you are putting your plan together and lining up your resources. From your comments, it appears that you are going to tear down the existing structure. There may be some value in rehabing part of the strucuture from a loan perspective. If it is truly new construction on a lot, then the parameters will be around a construction loan. There are many options for these types of loans, but they all have at least two things in common: higher interest rates and more money down.

There are loan products that will allow you to start as a construction loan and convert to a mortgage once you have completed the project.

Please let mek now if you need additional resources to help in this area.

Thanks
Ritch Haenke, Realtor(r)
Coldwell Banker, United Realtors
512.633.3909
rhaenke@sbcglobal.net
0 votes Thank Flag Link Tue May 6, 2008
Most people would need to get financing from a lender for this type of project, but if you have the liquid assets available and willing use your assets, you would not need to acquire a loan. Probably, would be required to provide verification of this fact and the liquid assets be reserve for the project.
0 votes Thank Flag Link Tue May 6, 2008
Ann,
You will need special financing for this property. Best to check with local banks. Tell them what you want to do and your timeframe for doing it and they can give you the best options. Be prepared to put a significant amount of money down...something like 30-50% on the lot. Another idea is go directly to the builder. Let them buy the lot for you on their line of credit.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Tue May 6, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
Today you'll get 80 - 90% of the value at 12%-16% interest. You may have to pay points up to 5% at close. It seems like a lot to me but its better then paying a partner 50%.
0 votes Thank Flag Link Mon May 5, 2008
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