New construction loan on lease to own land?

[Anonymous]

Hello everybody I have a question to pose to the experts.

So my parents own a large parcel of land and we are currently looking to buy a new home. They are leary of selling off any land (old hippies)1 but to told us they would do a lease to own over a 10 year period. So the question is would we be able to get a new construction loan with this kind of land owning terms? Ideally a usda guaranteed (qualifying terms are all there) maybe a fha?? Just curious if this is a thing??

[JVille]

No the Parcel must be completely in your name and the bank will want their lien/Mortgage in First position.

[IOBA]

I have, in the past, done land and housing loans separately.

I have bought the land.  Had a mortgage on it.  Then looked to get a house built on it.

The house lender (to put a house on the property) ALWAYS insisted on putting a lien on the land and tying everything up into one nice little packge, with them in first position.  I have ALWAYS refused to do so.  And in several cases, walked away from the lender.  At least one lender always came back to me and worked with me on my terms.

Maybe it was the times, maybe it was my being firm, maybe it was the fact I had equity in the land, but I have always prevailed.  The house people (lenders) never bundled the two things together.  I had two separate mortgages.  I had equity in the land (anywhere from 30-50% at the time I wanted to put a house on it.)  I always had cash to pay on the house (anywhere from 20-35% down.)  I paid off the land first, then worked hard to pay off the house.  If I had ever had to refinance, it would be as a house on land, but never for an initial purchase/build.

I can totally understand why a house lender would want to have legal access/ownership to the land.  It's not like they can repossess a stick built home and haul it away if you defaulted on the house.  And with it being your land, you could (technically) forbid them from coming on the land.  It puts the lender in a poor position to recover from a default on the mortgage.

Would you consider other options?

Like buying the land from your parents in a private deal.  At some point in the future, refinancing with a lender or paying off the loan to your folks early.  If you want to live on the land right away, would you consider a cheap RV or mobile home that you could pay cash for and set up on the land, so you only have the land payment?   Once the land is paid for and you have savings, consider building the house of your dreams.  Pay cash if you can.

I don't know if you can do what you asked here, but you could certainly go talk to some lenders and ask them.  Remember that the lender is looking to secure their interests when doing a construction loan and equity in the land is a plus.  It's not in your best interests, but it definitely sweetens the deal for the lender.  THEIR money, THEIR rules.  

[me12345]

Sorry, but no lender will give you a construction loan under those terms...... You must own the land in your name.

Thanks,