We bought our lot when we were ready to start the process. I could not find a bank that would give us a construction loan+ lot loan in one without plans being settled, which of course makes sense. However, the lots here (close-in Houston, TX) are quite variable, and I thought it was borderline crazy to pay an architect to design a house for a lot I didn't yet own because we easily could have ended up with a house that we couldn't build for any number of reasons. For us, it ended up being a "chicken or the egg" dilemma, and we ultimately decided that we were willing to pay interest during the design phase, which we expect to last 4-6 months. The carry costs weren't that high when compared to the potential lost architect fees.

I am not sure I would have made the same decision for an 18 month timeline. Are you sure you could get a lot loan for that long? We didn't find one with a term that long with a low enough interest rate to make it worth our while (ours is 12 months) but I also only considered 3 banks, whose loan officers friends had recommended, so I don't have much of a frame of reference. In addition, we found that lot and construction loans tend to be so local that it's hard to generalize them.

I would run numbers on the carry costs, and determine if that increased cost is the price you are willing to pay to be able to build on that lot. If this is your forever home, it might be worth it to you. If not, I'd think a lot harder about it.

You can't even really design a house without knowing the property it will sit on. Well, you can, but it won't be a good fit unless you take into consideration the direction it faces, how the sun travels across it, the setbacks needed, the clearances needed for side load vs. front load garages, etc. And you can't know any of that without buying the property. If you have some wishes for the home design, like that side load garage, or a sunny south facing family room, then you need to look for lots that will have the width and face the direction that will allow that to happen.

Buy your lot, then get it paid off if you can before you start to build. It can count as equity for you for a loan with the bank as long as you don't plan something overbuilt for the area.

I think it would be helpful to know were you are located. We are in ohio, and we purchased our lot earlier this year! But around here many developments offer owner financing and at a 5-8% interest rate, ours didn't even ask us for a credit report! We did it on a 3 year payment with a ballon so it was payments as if we were paying on it for 15 years.

I really do recommend if you are in love with the land to go ahead and get it. I know we would have been upset had the lot we found sold before we were ready-

Also keep in mind that the monthly payments you make will end up counting towards your down payment on your home! Again construction loans vary by region.

We are getting ready to close on ours hopefully Friday as we finished underwriting and got the clear to close for ours.

We bought our lot 4 years ago and I am just now building because the location was just too good to pass up.

You need land before you can do a floor plan because that will determine what kind of a house you should build.

We purchased our land this summer and weren't planning to until next year. It all depends on location and what you are looking for. If you see one that is what you want and it's not a dime a dozen then maybe you should reconsider waiting.

We took the plunge because of the 'extras' it had that others on the market did not for roughly the same acreage:
- it had natural gas, deal breaker for us as propane is too costly
- was not surrounded by pig farms - big deal for me to be able to open my windows and not smell 'fresh country air'
- backed up to thousands of acres of state owned wooded land
- 25 mph road due to a curve (I have younger children)
- not in a subdivision
- near a subdivision that I can run and walk in safely (not 55 mph roads surrounding like most other 2 acre lots that we looked at)

If you see one that is 'it', you will know. As I said, we were not planning on it and ended up spending more than we anticipated because it checked all of the boxes.

Once you purchase the land you then can really dig into what kind of home would work there and it gives you extra time to do so.

My wife and I currently have our home for sale and set to close in 13 days (and counting) and started looking for a parcel to build on almost a year ago and finally found a perfect 30 acres about 6 weeks ago and placed it under contract. We are both Realtors and even having the "inside" information on many properties it still took us that long to find the land we knew was perfect for our needs.
If you are absolutely sure that this is the right property then lock it in before somebody else does and you regret not doing so...if you are not 100% sure then wait on buying it. BTW...there is a back-up offer (for more money even)on the 30 acres we are purchasing and if we would have waited another week we would have missed out on our perfect parcel and we would have been extremely upset.

gingerjenny--

This is a bitter sweet subject for me. A little background:

I bought the perfect land for my new home 2 months after putting my house on the market. We used the equity (at the time)in our house to buy the land and we did an "interest only" loan. We did this thinking we would sell in the typical 3-4 months. We were only paying $450/month for the land thinking we would spend less than $2000 in interest.

Fast forward 3 years and 9 months and we were still paying the $450/month interest. We paid over $20,000 in interest before the house sold. I started regretting every month paying this payment and the whole time house values were dropping. They dropped so low, we barely broke even on the house sell and now we had no "equity" to pay for the land when we closed. The bank was not too happy about this, but I negotiated the land cost into the construction loan and now we are now building our new house on this land.

I am not sure of your "financial goals" you speak of, but hopefully you will not have the headaches I went thru trying to get the "perfect" land.

This hits home for me as well. I can so relate to 'clean' above. We too decided to purchase our new lot (only 5 acres) about 3 years ago. It was so beautiful, we couldn't pass it up. We figured we'd just sell our current home, go into a rental, and build during that time. The house was on the market for over 2 years and it didn't sell. Meanwhile, still paying for our lot, plus our house. The upside, we don't owe as much on either after 3 years, but the down side is the double payments.

So, I guess ask yourself, how long can you "hold on" paying on both the land and your current mortgage/rent, IF the house doesn't sell. If you don't have to worry about your house selling (you rent), then I personally, would go for it. We don't know your financial situation (and don't need to), so those are some factors to use to determine what is best for you. There is nothing like a beautiful piece of property that you can't pass up to really make life interesting!

We're buying a lot as soon as possible - maybe next week - and not building for a couple of years or more.

Because the lot is reasonably priced and available and location, location, location!

Between purchase and building, I may lease it to the city to use as a community garden. That way they can pay for the water hookup :)

we currently live in Indiana. What I meant by financial goals was saving up to have a larger downpayment. We currently own a home and we have to sell that one as well. We can afford to build the size house we want but we want to put some higher end items in such as quartz or possibly soapstone...things like that. Every month we should be able to save about $1500 more towards the downpayment. So we could afford the land payment. However my husband is more concerned with paying all the interest. He thinks it would be about $2000 interest minimum before we are ready to build and that buys a lot of fancy lights. So, I guess we are waiting. I was trying to talk him into it now but no go so far.

There are 4 or 5 lots left in this subdivision (a one street subdivision if you can call it one) so I guess I'd be happy with any of them. Only one is a corner lot in which case i'd just have the garage door flipped to the other side of the layout.

The building housing market here is really slow so I guess thats in my favor as far as the lots not selling. Maybe in the summer we will go ahead and bite the bullet.

We are just trying to save more. We are worried about selling our current home in this horrible housing market time.

Respectfully, I'm with live-wire-oak. If you're pushed to pay these two payments, you probably need to wait 'till you're a little more financially prepared. Plus, this fiscal cliff stuff may affect all our wallets, it's not a great time to buy.

When you're ready, I'd say buy the land (and pay for it in full) so that you can design your house for it.

I've done both and general I think it's better to wait. Land is hard to sell, so if something goes wrong, either with the lot, the area, or your finances, you could be stuck with a piece of land you no longer want.

When I bought and built in NY the realtor warned me to absolutely not buy the land until all the board of heath approvals and permits were in place, because of very stringent requirements for septics, etc. We literally did all the planning, permitting, etc, before closing on both land and construction in one closing. Took 6 months. She said it's entirely possible to buy land and then an environmental regulation will change and it will be unbuildable. Obviously if you're in a subdivision this is unlikely to be a problem, but something could make the area undesirable for some reason (schools, nearby development, crime, cancer cluster, etc) and you'll wish you'd bought elsewhere and really not be able to sell.

If you do it all at once and something goes wrong, at least you have a house to sell.

If the PERFECT piece of land comes up and you feel it's once in a lifetime chance, then it may well worth the risk, but I'd still get surveys, soil tests and imagine everything than can go wrong first.

I wonder if there is a way that you could get 'first right of refusal' on the lot you like? They would have to offer it to you first if things started picking up. That would kind of hold your place in line while you save up your money.

We bought our rural land 5 years before we built on it, but we paid cash for it. It was helpful studying the land for a while before designing and siting the house. Our house is designed specifically for the property, which is sloping and has a view out the back.

We bought our lot in January and barely broke ground a few weeks ago. It's a long process to design/get permitted. We wanted to take advantage of the market conditions and interest rates so we jumped on it!

I very definitely wanted to own the land first so that the house could be designed to take full advantage of the land. So we bought our land (3.8 acres in a residential development) several years before we were ready to build.

At that time (summer 2003) we found that interest rates on "land only" loans were several percentage points higher than mortgage loan rates. So we did a "cash-out" refinance on our existing home - which actually resulted in us getting a LOWER mortgage rate then we had had on that house - and used the cash to buy the land outright. We had owned the first house for 18 years so even with our 30 year mortgage, we had plenty of equity built up.

With the cash-out refinance, we took a 15 year mortgage so, in theory we extended the life of our mortgage by three years. In fact tho, the lower mortgage rate - and the fact that we weren't trying to pay for the land at the same time - allowed us to easily make additional payments towards the principal. Thus, by the time we started building our new home in 2008, we were within a year of having the mortgage on the old house paid off completely. And of course we owned the land for the new house free and clear so that equity could be counted when seeking a building loan. And, by the time our new home was complete and our construction loan converted to a mortgage, we had completely paid off the mortgage on the first house.

Of course this kind of thing will ONLY work if you have significant equity built up in a first home and you can refinance to get access to that equity at a rate lower than your current rate.

If it was a unique lot and perfect setting for you, then I would recommend purchasing the land now as the extra $2,000 in your estimated interest would not stop me from purchasing the perfect lot. I see your earlier post that it is in a subdivision and there are 4-5 lots that you would be happy with so I would definitely wait and put away the extra money each month.

thanks everyone. We are going to wait til summer at least. I wish we could just find a house we love but after a lot of looking I know we need to build.

GingerJenny,

I know what you mean when you say you can't find a house you love. I do not love the house I'm in right now either, but it's been good for us. It's spacious; we actually don't use all the rooms we have. We're in a fantastic location with good school districts; and it's an inexpensive house, which has allowed us to save for our children's college expenses (we've just started paying those expenses, and we are so glad we were able to save over the years -- we're not scrambling and borrowing like so many of our friends). Yes, I hate the kitchen and want a better-designed pantry. I don't need the formal living room and dining room, and I wish we had a garage. I can point out LOTS of things I don't love about this house.

I absolutely want to build a house that I'll love, a house that has just the features I want, and we have the land and the cash to build -- but that doesn't mean that right now's the time. We WANT to build; we do not NEED to build -- I suspect you're the same. Most people are.

I repeat, if the money's giving you pause, waiting is the best choice. Not many people are able to afford THE HOUSE when they're still in their 20s and 30s. Take it from someone who's almost 50. Do not live too closely to the financial edge. Save for your retirement, save for your children's education first. Save so that you can build without pushing yourself financially. You'll be glad later.

We bought our lot five years before building. We needed to save money to build, wanted to observe the property in all seasons, and take our time thinking about the views from each room, etc. it also took us a year to decide on an architect and 9 months to design the house.

Well, I bought first and was hoping to build in just over a year. We are 6 months into paying on the land and I dont regret it one bit. We got a steal on the land (foreclosed). While we are paying interest, also note you are paying towards something that should count as some equity towards building the house.

We are hoping to have the remaining $40k paid off this year (happy new years) and have a 30% equity with the land. This will go a long ways to avoid stuff like PMI later on. So in reality, if interest may offset PMI later, it may be close to a wash. We financed out land through the Veterans Land Bureau which had a mediocre rate (7.25%) but local banks wanted closer to 9% if they were even willing to lend on raw land (in a development)

i have tried to locate info on usda home loan program, as a first time home buyer. I cant find an honest answer or realistic. All im trying to do is either buy land and build in 2yrs. Or try to locate an area that has already newly build farm style homes. i reside in florida. I have located a mortgage firm that does construction and land all in one loans.? But I cant get an answer if going that way, does that mean the payments i make how much will be put to the construcion or home loan pay back.. ?? I would like to own the land.

I spoken to several realtors, chats, bankers, lenders, etc. i cant get a straight answer unless i apply a new applicaiton. NOT!!!!, i just need info before i put my personal or get stuck.. whats the best way to get a newly build farm style home (without farming) with a usda loan? Is it best to go with a banker, or lender? Good Luck to you all. Merry Christmas.

Start a new thread with your question. Don't tag it onto a five-year old thread...

FWIW, a creatively designed custom home has it's concept and execution based on the property and its characteristics. Thus, an architect cannot realistically commence design without having a good understanding of the land and its characteristics.

For financing options, talk to several local lenders.

We bought Our lot and sold our house three weeks later. Who can carry two mortgages? Anyhow we ended up renting out the old house that was on the lot and then staying in a different rental for a year. Now the old house is down and we are in a rental nearby while we build.

@d z25, Virgil is right, start a new thread so you can get answers to your questions. I will say this: USDA has many restrictions in order to qualify for their loans. Start here:

https://www.rd.usda.gov/publications/regulations-guidelines/handbooks

This is a program for purchasing modest homes in rural areas. If you're trying to buy land and build on it, that's going to probably not fit the parameters of the loan assistance program. You MIGHT get away with it if you own the land outright and are not financing it, but I sort of doubt it. Most of these programs don't provide the financing until they're satisfied with the dwelling. And they can be ridiculously fussy about the dumbest things. (Says she who has a VA loan). Purchasing a home is an entirely different kettle of fish from a construction loan.

^Holly is right. There are income and asset restrictions that is why I posted the link directly to the guidelines. There isn't any flexibility at all if you exceed either the income or asset maximums. Other loans don't have those restrictions, in fact, the more income you have and the more assets you have, the better it is for the loan.

We bought land before designing a house, though we did meet and discuss with builders before making the purchase. Open land in the area we want to build is dwindling fast and we knew it would be a risk to wait. The risk is what we are currently experiencing: we bought the land and are paying for lot loan + rent and now the rising cost of building + an expensive design that doesn't meet our budget has us in a pickle. We have to keep investing more money (in new or redesigned plans) before we can move forward or we have to cut our losses and try to sell the land. Just wanted to mention this risk as we did expect to end up in this frustrating situation.

land first