Building a house/Construction Loan

[pixiedustaholic]

Can someone please educate me on how obtaining a construction loan differs from a mortgage on an already built home? My parents deeded us an acre of land and we want to build a house on it. Does the value of the land count towards our down payment? How hard is it to get a construction loan right now? I really don't know where to start. We would need to sell our current home but don't want to do that until I KNOW we can get a loan yet I don't want to get ahead of myself and get excited if in reality we need to wait. Any advice? TIA

 

[Darcy03231]

First you need to decide how much you will have to borrow to complete your house. Whatever price you and the builder decide on, add 20%.

With a construction loan all the money isn't paid out at once to you. Its paid out in stages to your builder. After a certain amount of work is done, you approve, builder get paid, etc., etc. until the house is complete. Once the house is complete the construction loan is re-written into a conventional loan. I believe that you pay the interest only on the construction loan until its converted to a conventional loan.