Using land as Collateral for a new build?

[goosefraba1]

Hey guys,

Does anybody have experience with doing a new build while using land as the collateral? From what I have read, the equity in the land must be worth 20% of total build price for the house. The land that we are looking at has asking price of 60k (best school district in the county, one of the best communities in the county, already has natural gas/water/sewer ran to the lot). We are going this weekend to speak to our first contractor about the process. Looking at 230k as our budget for this.

We currently have 40k in the bank account. Could float 30k at the land currently. Or we could just wait another year and buy the land out right. It looks like if we wanted to build using the 20% equity rule, that we would need about 46k equity into the land. Would it not just be smarter to buy the land outright?

[Fishindude]

Sounds like a "borderline" loan from a lending standpoint.  If you had the ground paid in full it might be a bit more attractive.   
However, this is done occasionally.  You will just have to talk specifics with your lender to see what they will allow.

[adamcollin]

I think you should buy the land right now as the prices may increase in future.

[bobechs]

I think you should buy the land right now as the prices may increase in future.

Sounds bogus to me.

But maybe you know something we don't.  Care to fill us in?

Start by saying: "I am not a robot"

[goosefraba1]

Honestly, we are going to talk to several housing contractors before we pull the trigger. We are fine in the $600 a month rental currently. We would just like to have a home of our own soon as we are trying for kids. That doesn't mean that we have to jump at the drop of a hat.