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What comes first the land purchase (chicken) or
the construction loan (egg)?
This Chapter is only for those that do not own land yet. I get calls every single day from people wanting to build a new home but have yet to purchase land, obtain house plans, figure out the construction costs and most importantly have yet to submit house plans for approval and a building permit. The phone calls I get are from individuals wanting to combine the land purchase and construction loan into one loan. Obtaining an all in one construction loan with the purchase of the land is possible and does happen but rarely works out, here's why.
- Rarely will a land seller and realtor wait around a couple of months for you to obtain house plans, find a builder, obtain costs and submit plans to the county planning department for approval. All of the above items are required by the bank if you want to combine the land purchase and construction into one loan.
The most common exception to the rule is if the land is being sold with approved house plans or if the seller of the land is willing to wait for you to get all your ducks in a row.
The most common way to handle this problem is to buy the land first or by obtaining temporary seller financing or a land loan. Once you own the land you can focus on obtaining the items required by the bank in order to qualify for a construction loan.
