There are plenty of good builders out there, and I'm sure Karen M. is one of them, so Karen, please don't take my comments as relating to you.
@Tyler Byrnes, lending on land for the building of spec homes is one of the riskiest loans you can make. If you collateralize only the land, you are usually under collateralized, because if you had to foreclose, unless you are in a hot area, the land will sell at auction for far less than the retail value.
Cross collaterallizing with additional properties adds a great deal of extra security.What it means is when the mortgage or deed of trust is prepared, it links to not only the land in question, but other properties. Therefore, if you have to foreclose to get your money back, you are foreclosing on the land AND the other property(ies).
An important point: If the second property already has a mortgage on it, your position for that property would be second. Therefore, if you foreclosed, you would be subject to the first mortgage. Meaning you, or whoever bought it at foreclosure auction, would have to pay off the first.
If you cross collateralize a property where you go into second position, the advantage is that a borrower is likely to work harder to prevent foreclosure on two properties than on one. Of course, if his financial world is crashing, it won't help. So consider what you agree to collateralize.
Your attorney would draw up the mortgage (deed of trust) documents, and would do a title search on both (or all three if you use more) properties. The borrower pays for your loan docs and the extra title search and title insurance at closing.
Also strongly recommend that you find an inspection company and have them do the inspections and approval of draws based on the construction budget the builder submits to you. (budget should be submitted to you before you decide to lend) If you can't find an inspection company on your own, a bank that does construction lending will know the local inspection companies. Try googling "construction inspection yourcity" or something like that.
In general, if you are a new lender, I would not recommend starting with a deal like this. I make some bad decisions when I first started, because you don't know what you don't know. If you are very comfortable with the cross-collateralized property, it will probably be fine, I'm not trying to scare you, but it's a fairly complex deal for a new lender to manage if something goes wrong. Just my 2cents
Ann Bellamy, Buy Now, LLC
Hard money lending in NH and MA, and for free networking in MA, http://www.BlackDiamondREI.com