For us it was 20% of what we were borrowing.

20% of what you are borrowing.

20% of what you're borrowing, yes, but you also need 20% of the build itself in contingency money set aside as well.

The answers here are interesting because it's different with the banks I work with in Ohio. The percent down payment has always been applied to the total project cost which includes the land. So if a client purchases a lot for $50k independent of me, and if the contract they sign with me to construct their home is for $200k, the required 20% down is applied to the $250k, the total project cost. In this case that is $50k; if they purchase the lot free and clear it would serve as their 20% down payment.

I will take this one step further. Back in the day, like 8-10 years ago, a developer could buy raw land, entitle it (meaning obtain all the government zoning and engineering approvals to put in a subdivision) with the local government agencies, and increase the value of this land by 15-20 percent. In more restrictive jurisdictions the percentage increase could be higher yet. Importantly though, a developer could count this value increase as part of his/her required equity, or down payment, on the project. Point being, equity, or down payment requirements, were and are based upon total project cost where I do business (Ohio).

Assuming that the total project cost (land + construction costs) are less than the appraised value, it's 20% of the total project costs. In general, if you've owned the land at least 12 months (from loan application I think), they will use the appraised value. If you've owned it less than 12 months, it would be what you paid for it. So if you paid $50K for the lot and had $400K in construction costs, you'd have to come to closing with $90K plus your closing costs.

If you're buying your lot and house both from the builder, it will just be 20% of the turn-key price. In your example, you'd put down $50K and have a mortgage for $200K.

This could vary by bank but I think these are the rules that Fannie Mae uses. The reason that the closing costs would less is probably because you get a better interest rate (or less points) and don't have to pay any PMI.

Yes I am with you ohbldr. I have always been told you would be required to have 20 percent down of the "appraised value" of your project. So if your project appraised for 300,000 you could borrow 240,000 total. If it ended up only costing you 260,000 to build you would only have to put down 20,000(and of course your closing costs would be additional funds you would need to cover).

That bit of "if it appraises" is why you need a 20% contingency fund--that you don't dip into too heavily. What's been happening frequently is that a home that costs 400K to build only appraises for 355 and the owner has to bring that extra 45K to the table to close.