Buying the land is like buying anything else except it’s impossible to move. Usually if you are working with a builder in an established subdivision, one contract covers your purchase of the lot and the home. If you select an individual site and intend to work with a custom builder, you will probably purchase the lot using a separate contract.
You can pay cash for your lot or you can finance it. Once a lender has prequalified you, you are in a better position to make decisions about how much of your resources you want to commit to a land purchase. The same entities that offer loans for homes will typically offer loans for land purchase. Keep in mind that this creates a monthly liability on your financial statement that may affect your construction and mortgage loan qualification. Making the land purchase contract contingent upon your approval for construction financing is a good idea in some cases.
When purchasing a lot, use a written contract that specifies the location, includes a survey, and describes the exact terms of payment. A title search should be performed and title insurance purchased. Either way, you are one step closer to building that new home.
