Posted on: 12th Mar, 2007 08:34 am
My parents are gifting me just under half an acre as a wedding gift in a community with favorable property values. My fiance an I are looking into having a pre-fab/modular put on the property. The value of the land will likely far exceed the cost of the home and result in a healthy equity when it\'s all said and done. My question is in regards to my options in using the land as collateral. Will this increase my baraining power with banks, and in what way will the loan process differ from seeking a traditional mortgage to buy?
Paul,
Congrats on your marriage and on the gift of the land. While I can't speak for all lenders, I can tell you that many lenders will not allow you to use the value of the land if you have owned it less than one year. Instead, they will go off of the amount you paid for the land which was ZERO since it was a gift.
My suggestion is to spend the year letting the property sit undeveloped and use that time to find a builder or modular home that really meets your needs. If you have equity in the land, then yes, that will offset the overall cost of financing and be an asset in your favor. If you can't stomach waiting, then perhaps you should just sell the land and buy an existing home.
The loan process will differ in that you will be looking for construction financing which will require you have information about your builder, what is being built, etc. Meet with a local bank or banker and ask them about construction financing options. They will let you know what to do to get started.
Good luck
Congrats on your marriage and on the gift of the land. While I can't speak for all lenders, I can tell you that many lenders will not allow you to use the value of the land if you have owned it less than one year. Instead, they will go off of the amount you paid for the land which was ZERO since it was a gift.
My suggestion is to spend the year letting the property sit undeveloped and use that time to find a builder or modular home that really meets your needs. If you have equity in the land, then yes, that will offset the overall cost of financing and be an asset in your favor. If you can't stomach waiting, then perhaps you should just sell the land and buy an existing home.
The loan process will differ in that you will be looking for construction financing which will require you have information about your builder, what is being built, etc. Meet with a local bank or banker and ask them about construction financing options. They will let you know what to do to get started.
Good luck