Beware of one thing when dealing with a bank and doing a teardown - unless you make it very clear to the bank that you intend to tear the house down, they will end up being very concerned when it starts to come down. We recently had a situation where we bought a house and took out a mortgage for only about 50% of the bank-appraised value. We bought the house because it was a fixer-upper and we wanted to tear it down and rebuild. It was in very bad condition, and everyone else looking at it during the time we were making an offer on it felt the same way...there's no way someone could have lived in the house for long without fixing it up. We even told our mortgage contact at the bank that we were planning to tear it down and rebuild (with our own cash not a construction loan). He seemed supportive and commented many times on what a great lot it was and how nice it would be when the house was "done." So, it was clear to everyone involved that it was planned to be a teardown. Long story short(er!) - we bought the house in Sept, and in January, when we had our completed architectural drawings, structural drawings, had received building permits and were ready to start demolition, one of the final items on my list was to obtain "course of construction" insurance, which takes the place of homeowner's insurance when you are dealing with a construction/teardown project. In the process of signing the insurance documents, I noticed that the insurance company wanted to know if the bank should be listed as an additional payee in the case of a claim. I called the bank to ask if they're typically listed on a course of construction insurance, and after speaking with a few different representatives (none of who knew anything!), I was transferred to the office of the VP of Risk Management (or something like that)...anyway, someone on her staff almost had a fit when they heard that we were about to tear the house down. She kept saying that our house is the "bank's collateral" and not ours to do what we wanted with and that we could not proceed until we had the appropriate bank approvals, etc, etc. Keep in mind that we were not asking for the bank to pay for the construction, we are paying for the construction in cash, and we had an appraisal (done by the bank's OWN appraiser!) that was completed in September which showed the value of the entire property to be $1,100,000; they even broke this down between the lot value (approx $950,000) and the house value (approx $150,000). We have a mortgage for $500,000 so obviously, even in a worst case scenario, if the house was torn down and never rebuilt, the bank has FAR more collateral in the land than they ever had in the rickety old decrepit scary house!! Still, this person INSISTED that she had to go to some sort of approval committee and get approvals before we had a demo truck even enter the property. My husband and I were furious (although also somewhat bemused by this bizarre lack of logic and ridiculousness) and we spoke with several others at the bank who listened to our story and believed us when we told them that we had been very clear with the mortgage person during our loan approval process, telling him all the time that we were buying a "teardown"!! Our point was that, if there were further approvals necessary, he should have told us about them up front. Finally, we had a senior VP reluctantly agree with us but we are still being hounded by this VP of Risk Mgmt who is still insisting that we need to forward her a copy of our contract with our builder, our approved architectural/structural plans and all kinds of other info! At this point, we're ignoring her (because we have the approval of the senior VP), and construction has started, but this has been a big pain and total surprise. I'm telling you this long story because it just illustrates how crazy and upside-down the banks are these days and how their underwriting/loan approval processes have gone wildly from one end of the spectrum (super wide open) to the other (absurdly tight). My husband and I are the perfect clients for them - we have stellar FICO scores, have a longstanding history of repaying all our prior mortgages (two of which were with them), and MOST importantly, the bank has MORE than enough collateral in our current property to cover it all even if we never paid another dime!! So, I'm sorry to say it, but like others have basically said, I would be surprised if you get a construction loan with your current situation, and IF you decided to and could somehow do it on a line of credit or home equity situation, BEWARE that the bank will have a fit if/when they find out that you're tearing your house (otherwise known as the bank's collateral) down. Sorry, I don't mean to be a bummer about all this but it's best to go into it with eyes wide open and know the current lending/housing environment. Whatever you do, best of luck!!

Well, that may be how it used to be done and nothing says it can't be done that way now, but in today's building economy, I might err on the side of caution. Alot of builders are hurting & some are behind in payments on other projects. You are going to want to do everything you can to protect yourself & your $$$. As far as the construction loan goes, if I'm not mistaken, you and the builder would get roughly the same rate on the construction loan so there's no savings to be had there. The "savings" he is likely talking about comes from the fact that he is making the monthly interest only payments & you're not having to front that every month as the house is built. But trust me, he will get that money back with interest--so there's really no savings at all and it will probably end up costing you more. If you get the loan yourself, you will be responsible for paying the monthly payments. (Average construction interest in my area = 5%. To figure your payment-which will change monthly-you take the total amount drawn off the construction loan to date, multiply by the interest rate & divide by 12. It's not until you get toward the end of the build that the payments really get up there, but remember you are still only paying interest-no PMI, taxes, or prinicpal). As far as that 15% downpayment goes, depending on the type of contruction loan you get, you may have to front that 15% to the bank and they would make those funds available during the draw process. This helps protect you & the bank as the builder doesn't have direct access to the funds anytime he wants it--the bank will have to come out & make sure the work has been done to a certain level/percentage of completion and only then can the funds be released. There are typically 4-6 draws on an average construction loan. From the builders' point of view, if he gets the loan & you front him the 15%, he knows he has funds readily available so he can pay subs and stay ahead of the game and not have to wait on the bank. It may also allow him to get discounts from the subs on labor costs if he pays them in cash from your 15% as the job is done or on a weekly basis. My question here would be--will those savings be passed on to me as the buyer? What type of building contract are you going with--cost plus, fixed price, etc? If I was putting my 15% up front then I would want control over it--I get a copy of the invoice (sent US Mail) & I cut the check to the sub directly. As you submit receipts to the bank, those funds get "replenished". There have been too many cases where the builder uses the funds for something else and subs don't get paid in a timely fashion or even at all resulting in a lien against your house. Now I'm not saying your builder would fall into this category, afterall I don't know him. But it just makes sense to be cautious expecially in today's climate. I would be very curious to know why he "wants to move super quick to get things started (something about a permit possibly expiring)". Does he own the lot the house will be built on? If not, what permits has he already pulled on a build he doesn't have a signed contract for yet? This doesn't make sense to me. If he doesn't own the lot, he may just be trying to rush you into a decision. My advice is don't rush into anything. Make sure your attorney reviews any & all contracts the builder wants you to sign. Make sure your attorney and his attormey are not one & the same--you need your own to protect your interests. Make an appointment to talk to some different lenders in your area about your loan options and their requirements-don't let anyone pull your credit report until you know you're set & ready to pull the trigger-no sense in dropping the credit score prematurely which can adversely affect your interest rate. While you're talking with the lenders, ask if they have dealt with this builder before or have had clients who used this builder and what their experience was with him. (I didn't know this one until the other day when my lender said he was going to ask around his banking friends about our builder to see if he tends to run over budget on his builds--sign of lowballing the bid to get the contract then springing the real cost on you at the end when it's way too late, differences of opinion on what is owed him, any complaints from subs not getting paid, etc). You may also want to do a search on GW about building contracts--there is alot of great information on here with specifics on how you can help protect yourself & your pocketbook. Make use of your banker & attorney to help protect your interests as well. Good luck to you & congratulations on starting a new house!

saragene. stay away from mobile homes. 1. they treat it like a car. 2. it depreciates rapidly. 3. it is over priced. 4. most who sell them are crooks. if you decide to buy one of these poorly constructed so-called homes, do the following; 1. get your own appraiser. 2. get your own inspector. not someone the dealer/seller knows. 3. investigate the companies back ground. check for dissatisfied customers. there are plenty of links on the web. 3. investigate the dealer/seller background. 4. check local and state laws regulating how the home is to be sold and set up in your area. 5. get background references of the guy who installs your home. wouldn't hurt to get that about the dealer/seller either. 5. how many complaints were made against the dealer/seller/installer? These is plenty more to check into BEFORE you buy a mobile home. I will leave it at that for now. I'm waiting for the industry people to chime in on how you should not listen to me. You'll know what i mean when it happens. Good luck, and think about buyinh as Jim Walters home or something like that. You will be much happier in the future.

I used Key Bank thru Paramount Capital Financing. I'm not sure what kind of loan other than pool loan but it was fixed rate for 20 years and they did put a lien on my home and didn't require equity. (I have only lived in my home 1 year and didn't have any equity.) I already have 2 loans against my home (1st for 80% loan and 2nd for 15% loan) and they were still able to do basically a 3rd loan against the house.