"You need to get qualified before you start looking," said Mike Zell, a vice president at SunTrust Mortgage in Woodbridge.
"No builder or Realtor is going to take you seriously unless you have a qualification letter from the bank."
Although borrowers can get one loan for the land and another for construction, most typically get one loan for both and do a one-time closing, Zell
Funds from that loan are then disbursed to the builder at various stages of construction.
When the house is built and an occupancy permit is issued, borrowers then modify their loan to a permanent mortgage, such as a 30-year, fixed-rate loan, Zell
Many banks, however, no longer offer the land and construction financing.
Those that do usually demand down payments of 20 to 30 percent, Zell
The larger the loan amount, the higher the down payment.
That means a borrower with $300,000 in land costs and $500,000 in construction costs must come up with $240,000 in up-front cash in order to make a 30 percent down payment.
Inspections, construction administration and other costs can add roughly $2,000 to traditional closing costs, Zell