How to Get a Lot Loan

Once you find the lot you want to build your new home on, it's time to start shopping around for a lot loan. You will save money if you take the time to educate yourself on the process and spend some time comparing different companies and their rates.

Instructions

1. Before you meet with a lender, have a detailed timeline ready as to when you will be building the home. When you arrive with a well-planned outline, lenders are more likely to take you seriously and invest in you. Applying for a lot loan without a timeline makes many lenders too nervous to loan you money.

2. Be ready to talk to the lender about how to convert your lot loan into a construction loan and then into a permanent mortgage. By staying with one lender for all of these needs, you will save some money.

3. Provide at least 20% of the cost of the land (loan to value or LTV rate), in order to get decent interest rates. Many lenders will not loan you the money above this percent except at very high repayment rates.

4. Research various options online and get a number of mortgage quotes for the lot loan. Remember these quotes are not exact, but can give you a ballpark idea. Do your research with different companies, but know that interest rates can change within a few hours .

5. Understand the difference between a fixed rate and adjustable rate mortgage, since you will have to agree to one form or the other.

6. Compare the various aspects of your online quotes as closely as possible. Separate the many fees from the actual loan, and then compare the basic plans and the fees separately.

7. Investigate the company that looks like it can provide the best deal. Research their customer service style, longevity in the market and even their record with the Better Business Bureau.

8. See if the lender will negotiate on the fees for the mortgage loan. These are often loaded up, so there may be room for changes and adjustments.

9. When satisfied with the loan conditions, sign on the dotted line.

Tips & Warnings

• It's crucial that you know what you are talking about when it comes to the lot, the construction of the home and your financial needs. Learn all you can before meeting with a lender and filling out any forms.

• Don't be in too much of a hurry to read the small print. This is where a lender's little goodies are: good for them and bad for you. If there is anything in the paperwork you do not understand, be sure to ask the lender to explain it.

• Stay away from any contract with an Early Redemption Charge (ERT) in it. This simply means you pay an extra fee if you pay the loan off early. Try to negotiate it out of the contract, or go to another lender. Essentially, it means you get penalized for being frugal and getting out of debt early.