Land for down payment collateral???

Anonymous · ‎03-19-2008

We are thinking of going for a FHA construction loan. I have done a lot of research but can't find the answer to this question:

Can you use your land as collateral for the down payment?

We own outright a 3.29 acre piece of land appraised at $120,000. More than enought to cover the 20% down required.

Can we do this???

THanks!

Anonymous · ‎03-19-2008

I currently have an FHA. I don't understand why you need collateral.

Anonymous · ‎03-19-2008

One more thing.....

Are you generaling it yourself? If you are having a contractor doing all of it, just have them take out the construction loan. You won't need to worry about collateral, downpayment, etc.

Anonymous · ‎03-19-2008

THe collateral (worth of the land) would be used instead of the required down payment on the house. I realize with FHA it could only be 3% down payment, our land is worth much more than that.

So basically instead of giving them a cash downpayment you would be pledging your land as collateral.

I know you can do this with regular mortgages. Just wanted to know about FHA.

Can you put your downpayment and closing costs into the construction loan with the contractor. I though you had to pay those in cash at closing.

Message Edited by kmcmillan on 03-19-2008 11:31 AM

Anonymous · ‎03-19-2008

Regarding the FHA collateral, I don't know what to tell you. My FHA is on an existing home, and I had to put down 3000 on a $135k home. The origination fee was a part of the 3000 down.

As for the construction, given that the housing market is less than ideal to sellers and builders, you can take advantage of it.

We are building right now. I managed to find a builder who will build for the right price, he will fund everything from start to finish. The interest of the construction loan is already tied into the final price of the bid, so no hidden surprises on that piece. The only money we had to give was ernest money. Some builders can also assist in closing costs. They won't offer more times than not but you can ask. Its not out of the ordinary to ask.