Using Land As Collateral For Construction Loan
My wife and I recently came across a great deal on a piece of land in a great family town that we would love to build on home on. Long story short the land is not zoned for a home at this time and the seller is giving us a fantastic price. The owner really wants to get rid of the land, but has always balked at the work required to get it zoned and is tired of taking care of it.
My wife works in real estate development and has had preliminary discussions with the city and we feel the zoning will not be an issue. We have a contract drawn up and have verbally agreed with the seller that the by signing the contract we have the exclusive rights to the land for 1 yr while we work with the city to get the land approved for zoning (we estimate a couple of months on the low end). At any time we can back out if the zoning efforts fail or we decide for some reason we want to back out.
Our ultimate vision is to get the land zoned, purchase the land and then get a construction loan to build a house on the land.
This would all be new to us (we already have a mortgage on a rental unit) and we currently rent. But we have 2 young kids and would love a larger home for our boys to grow.
I have a few questions that I was hoping to get some advice.
My thought was to purchase the land with cash and to use the land as collateral for a construction loan.
My wife and I have done quit a bit of research and figure if everything goes close to as planned, conservatively we would have around $60k of equity (land+home) once the finished product is appraised.
I guess my main question is in regards to using land as collateral for construction loans. I want to go about it using the least amount of money out of pocket as possible.
Can you take out a loan for land and then use that as collateral? Or do you need to own the land free and clear?
Are there any key points or pieces of information that could be of help to us in this search that you would recommend?
Is there a certain profession or line of professionals that you would recommend seeking for with this kind of project? I feel there are so many options and details involved seeking professional guidance may be the best move for the long run as it could possibly save a decent amount of money and headaches.
Thanks in advance!