Question:

Can I get separate land and residential construction loans?

Answer:

Land and residential construction loans can be taken separately. If the borrower does not have any other equity in the property they may obtain a piece of land first to build some equity. There are lenders who will require that the borrower contributes at least 5 or 10% to the construction project and owning the land or having some equity on it is a good start.

However, there are programs allowing for combined land and residential construction financing which can vary from 75 to 100%. Most common LTV is 90% and excellent credit is commonly required. Construction financing of 100% is available full documentation only. Home site financing is usually limited to the purchase of 40 acres.

Some land only construction loans allow to be rolled into a Construction to Permanent loan when construction is about to begin. Separate or combined land and residential construction loans is usually best to obtain from lenders specializing in construction loans. Spanning a certain home loan niche benefits both the borrower and the lender, and if you are shopping for land and residential construction loans, you should act in accordance with this rule.

Residential Construction Loan Types

Residential construction loans may or may not include the lot purchase, depending on the home buyer circumstances. If there is a loan on the lot, it is often added to the overall construction loan, if with the same lender.

Also, depending on the type of subcontracting, if the loan involves a General Contractor to carry out the construction process until a beautiful home is completed, most lenders will offer only Construction to Perm Loans.

With Owner Builder residential construction loan programs, the owner assumes responsibility for carrying out the project and lenders usually allow both Construction Only and Construction to Permanent financing, to allow for greater flexibility for the borrower.

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