Based on my research, loans for land and construction lots are usually at a much higher rate than those for the purchase of a home. However, if a home does have an existing foundation poured in, will the accompanying land qualify for a conventional mortgage? Obviously, the foundation will be built upon subsequently using a construction loan. Personally, the scenario would play out in such a way that I could purchase the lot with the foundation, hold it for a year (or two) and then commence the construction process. Provided, of course, that the initial loan would be at a reasonable rate.


1 Answer 1


The driving factor here is the collateral that the lender has on the loan. On a conventional loan, they have the whole house and property (plus 20% down) to be able to turn around and sell if you were to default on your loan. Because of this, the lender has much lower risk in giving you money and thus can give you a much lower interest rate.

For land and construction loans, the collateral is much different. Simply having a foundation doesn't add much (if any) value to the lot so it is unlikely that the leader will treat it any differently than a simple lot. Lots can take a lot long to sell at the "right price" and thus makes it not as desirable of a loan to give.

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