Peter Economy - Building Your Custom Home For Dummies

Lot loans come in a variety of lengths, but few lenders offer them for more than five years. Your lot loan needs to be in place until the construction loan pays it off. Most projects can make it to the construction-loan phase within two to three years. If you think you’re going to take a long time to design your home or that you’ll need to save your money for a long time before beginning construction, then you may want to search for loans that last more than ten years.

How long it takes to begin the building process can vary wildly. The ultimate amount of time is based upon your local planning departments, how picky you are with your plans, how busy the current construction climate is, and many other factors. Figure out how long you think it will take and double it to be safe. Most of the delay factors will be beyond your control.

Contractors, consumers, architects, and many others often tell you that you must pay off your lot before you get a construction loan. This is the biggest myth in the custom-home-construction world. Actually paying off the lot isn’t a good idea unless it’s absolutely necessary. The following sections explain several good reasons to keep a loan on your land until you’re ready to build.

Buying your land is just the beginning of paying people in a construction project. The architect, the engineer, the well and septic people — and many others — all need to be paid along the way. The permitting process can suck your cash as well. These people and processes can add up to tens of thousands of dollars. If you run out of money because you put all your hard-earned savings into your land, finishing the build on your new home can become a nightmare. Having cash in your pocket is your best protection for keeping your project moving along. Check out Chapter 8for more on this subject.

Few lenders have refinance programs for land loans. And in most of those cases, they only let you replace an existing loan. Rarely does a lender give you a refinance loan where you’re taking cash out of a piece of land. That means that after you put money into the land, it’s gone forever — at least until your construction loan has started. Your only choice will probably be hard or private money, which can cost 5 percent of the loan up front and 10 percent annually. This increase compared to institutional lot loan pricing is an expensive price to pay for money you already had in your pocket to begin with.

Banks want you to have cash on hand before they give you a loan. The amount of required reserves varies from bank to bank (see Chapter 10for specific details). If you’re short on the bank’s cash requirements, it won’t give you a construction loan — even with a paid-off lot.

Текст предоставлен ООО «ЛитРес».

Прочитайте эту книгу целиком, купив полную легальную версию на ЛитРес.

Безопасно оплатить книгу можно банковской картой Visa, MasterCard, Maestro, со счета мобильного телефона, с платежного терминала, в салоне МТС или Связной, через PayPal, WebMoney, Яндекс.Деньги, QIWI Кошелек, бонусными картами или другим удобным Вам способом.