Do you already have owner financed land? It may be harder to find than you think, especially if you are looking at more than a year or so to completely pay. I would guess that the owner would need to take the place of the second lienholder (be subordinate). This means that they would only get paid whatever was left After the modular loan was paid in full. I highly doubt you could get any landowner to sign up for this.

You also cannot assume your bank/financier will accept you having a second loan.

Not gonna happen.

Many people that will do a land contract for land will not permit you to build until after it is paid off.

Saying this in the nicest possible way: If you can't pay for the land upfront, you may be stretching yourself too thin financially.

Pay off the land. Then you can have many more options.

Did you read the part about the FHA and the modular home? Those are significant obstacles to overcome. You have to be prepared for skin in the game.

No bank that plans on continuing in business is going to give you a mortgage for a house on land that is mortgaged to a third party. I doubt very seriously they will even give a construction loan, this would be amazingly risky and epicly irresponsible. I will admit that things like this do happen for commercial projects, and there are leased land communities, but those are different beasts altogether.

The fact that the OP is not approved for both loans further decreases the likelihood. Not to mention the fact, that were he approved for $10,000 more than the cost of house and land that it would still be very risky because even one unexpected expense can easily eat through a $10,000 contingency.

Red flags abound:

- A newly built house, even a modular, isn't likely to be less expensive than an existing house (much less a "foreclosed shack"). I think you're using some fuzzy math here; for example, you may have underestimated costs in some places. The world just doesn't work this way.

- If the FHA people won't loan you any more than the house + 10K, you shouldn't try to stretch yourself farther. Borrowing as much as the bank says you can borrow typically ends with you being house poor ... and you're talking about borrowing more than they say you can afford.

- When you talk to the bank, you will have to disclose any other loans you're carrying. If you're doing an owner-finance deal, you must disclose it. That will change your finances and very possibly decrease the amount they're willing to loan you.

- What you don't say speaks volumes: You don't say how much cash you have to put down. If the answer is "nothing much", you really can't move forward on this project.

My best suggestion: Save. Work, scrimp and save, and then come back and buy the land outright in a couple years. THEN you'll be ready to build the house, and -- yes -- it will still be available. Once-in-a-lifetime deals aren't real.

This thread is over a year old. I don't think the OP is around anymore.