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Building a home on a lot is very different than purchasing a resale home. There are various aspects to consider.
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- Financing- if the buyer is intending to purchase the lot and build at a later date, the buyer would obtain a lot loan which requires two closings : one for the land, then one for the construction of the house. Land Loans
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If you need a mortgage to buy land, it’s crucial to learn how land loans differ from home loans and what you’ll need to qualify.
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If the buyer is purchasing the lot and intends to build within a shorter timeframe, the buyer would obtain a construction to permanent loan which
allows for one closing
Both types of loans have very specific requirements and typically require a higher down payment than a resale property loan.
Construction to Permanent Loan
Construction to Permanent Loan
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A construction to permanent loan allows borrowers to combine a construction or refinancing loan with a mortgage. Here’s what you need to know.
smartasset.com
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2) Utilities – if there is no access to public water or public sewer , it must be determined whether the lot is able to sustain an onsite sewage disposal system (septic system). There may be a “passing” perc test on file with the local health department. This indicates that the soil type will support a septic system; however, the buyer must understand that there will be limitations on the size of the home and where the home can be located on the lot.
Also, if no well (source of water) exists on the property, the buyer will need to have a well drilled in order to build on the lot.
3) House plans -the size, type and location of a house on a piece of property depends not only on a buyer’s budget, but the specifications of the lot itself. Oftentimes, there will be a plat available that shows the dimensions for the property. If the lot has been perced, there will be a site plan for the most likely placement of the house based on the location of the septic system. This can be helpful understanding where the house must be located.
These are just some of the items for a buyer to consider when considering building on a lot vs purchasing a resale property. It is important for a buyer to work with a qualified real estate agent and coordinate all aspects of the process with the local health department, planning and zoning department, as well as an experienced builder, to gather information before a decision to purchase is made.
