Lot Loan Closed. We own it! ... well, 25% of it.

Finally got the lot loan closed this week. Wow! I thought we were almost there in August. It actually funded a day after our close date at the end of September. The lender was recommended by several people because they actually do offer lot loans and because they have the best rates. I spoke with several mortgage brokers and none of them do lot loans. US Bank did, and other banks had higher rates from my exploration.

The lot from the cul-de-sac.

Here are a few things to do in preparation for buying your lot. 

1. Make sure you have 25% of the lot loan or more for a down payment. 
2. Your down payment needs to be seasoned, meaning that it will need to be in the bank for a period of time. Typically that means 1 month.
3. Sources, including proof of where the money came from will be needed. We refinanced our current home in preparation for our new home, and so the money was recently deposited and we had a new mortgage. The bank wanted to know all about it, including a copy of the check used in the deposit. Since our refi automatically transferred the equity into our bank account, additional letters were needed to explain it.
4. Pay for the whole thing in cash if you can. You will need a certain amount of investment in the property to qualify for a construction loan, and equity in the lot qualifies for that.  
5. ...But do save some cash for construction. As you build, you may have to pay some of the contractors part of their charges up front or provide and pay for raw materials for the build until completed. Once you complete something (such as the foundation, etc.) the bank will pay for that portion.
6. The underwriter will likely need additional documentation. Be sure to get information back to the bank promptly, and follow up a lot. In our case the bank moved like molasses.

Our lot loan is an adjustable 10 year loan, with a 3 year period of fixed interest at 4.5%. It can go up 2% every 2 years with a max of 10% interest cap. We are planning to have it completed in the first three years, so it seemed ok. I don't dare look at rates now. I heard they have gone down this week.

Next steps are to complete the designs. I will log what we are thinking about here. There seem to be so many details it is overwhelming.