Ask in the buying and selling homes forum.

I just went through this myself. It doesn't matter what you paid for the land because to the bank it's only worth it's appraised value.

Short answer is that yes, you can use your land as some portion of your down payment. Would you have been better off? No sense in worry about that now and their is no way to know. This piece of land you bought might have sold by now if you hadn't already purchased it.

All banks and loans are different but generally in a construction to perm (C2P) your appraisal is done prior to you ever starting the build of your house. If the appraisal comes in low you'll simply need to put up more cash to reach your required or desired down payment.

Talk to your bank. I am in the process of getting a C2P with land I have paid off. What the bank did on the loan was simple. They took my bank accounts, added the value of my land, the value of my current house and called them "assets" Then they subtracted my debt which for me only included credit card debt and real estate taxes but I would assume most may have car loans, mortgauges etc. Using that they came up with a total personal worth. They also compared my monthly income vs the expected monthly payment for repaying the loan. While my payment is going to be about 50% of my monthly income, because my personal worth is enough to cover the entire project, and I have no other outstanding loans and very small CC debt the loan should fly through with ease.

I already know this because 4 months ago I sat down with my lender when we got an initial "final" number from our builder and asked her to tell me if I would be approved for that amount or if I needed to start cutting stuff out to get to a lower number. So before I even submitted the final documents I knew what they would give me.

Also, at my lenders suggestion, the builder added some extra contigency money to the key contractors bids (framer, excavation, roofer, HVAC) when we submitted the final numbers, so I should have a larger loan approved than I actually need to spend since I don't plan on making any change orders.

Every personal situation is different, every bank can be different. Talk to your lender it is the best way to get the answer for you.

Our credit union financed our build using our property as equity. We didn't talk to any banks, but I would highly recommend running this past a credit union, as many of them are more open to such options.

B Carey hit it. We bought our lot in Perdido Key and paid cash. There will be a couple of appraisals completed during the process, at least with our lender. When the house is done, there's no separating the land from the house. They'll lend you say 80% LTV. Have spare cash on hand in case you have issues. We got preapproved before we started this endeavor.

Our construction to perm (one time close) loan has a single appraisal on the front end based on the land (we own) and house plans. Our bank will loan 95% of the cost to build. We are looking at financing 80% to keep PMI out of the picture. To get the 80% figure, they combine the total appraised value for the land plus the house. So, the land gets us equity, but it's not a "down payment."

BethA-

Yes, you can get loans through some banks for less than 80%. But most people building are at the stage that they should be beyond PMI. I highly doubt that they get an appraisal on the house and a separate appraisal on the land. What they do, is get one appraisal for the house ON that land.

In Real Estate, The sum of the two whole is less than the sum of the two parts. You see this with upgrades, fences, pools, shop buildings, play yards, etc.

Just so OP isn't confused, the bank will do one appraisal at the beginning. That appraisal will be for that house on that lot. It should come to more than just the construction cost, but will probably be less than the construction cost + the amount paid recently for the land. Also, keep in mind, that if you sell the home in 1-2 years, it will be compared against pre-existing homes, so you will be lucky to sell for what you have in it (in most markets.) This is the new car smell effect.

The house and lot cannot be separated, so it is the value of the home as a completed whole that is important. Not the value of unbuilt land. Just because the lot value as a lot was 80K doesn't mean that it will bring 80K worth of value to the completed build.

The value of a home is mostly about square footage and location, not internal amenities so much. If you build a 1M building cost mansion in an area where there are only modest 50K camping cabins, that doesn't mean your home is "worth" 1,080,000. It will probably not be appraised at 50K, but it will not be anywhere close to 1M. That is the value of a home within the context of location. Location and building to the standard comps around you is rewarded. Building outside the norm is penalized, and needs cash.

Agreed, avoid the white elephant !

The bank will do an appraisal based on your plans and specs. The land is worth something but maybe not technically what you put into it. The cost to get in your utilities and driveway, permits, survey, etc. won't add value to the appraisal. You'll just need enough cash for the downpayment based on whatever it appraises for. So if the home appraises for $350,000 and the required down payment is 15%, you'll need $52,500 in cash to close, plus whatever the fees are.

That's what stinks. Our home is estimated to cost $370,000, but it would probably only appraise for $300,000.

"I think you should talk about it with bank experts."

Why are you guys digging up and commenting on a 3 year old post? I am fairly certain the op has figured it out by now.....................

Only if the estimate is low will u have to contribute more money to balance the desired down payment