To escrow..or not to escrow...that is the question :))

[Melissa]

Hi y'all!

I believe we have FINALLY found the dealer/contractor for our land home purchase. He seems very knowledgable and has been selling and placing these homes for 30 years. Now that we have almost completed the "option pick out" process....and boy is that a process...we are waiting for final pricing. No doubt we will eliminate a few options once that comes in What I have a question about is this...

This contractor says we would be better off financially if we opt out of the construction loan process. Meaning that instead of getting a construction to permanent loan we place our down payment...say $10,000 to $15,000 in an escrow to which he and we can borrow against for site prep, garage, home etc. (or place our land deed in escrow and borrow against that)
which would eliminate the extra points paid on a construction loan. Then when everything is complete we get financing on the home/land package. Does this make sense to anyone? When it comes to finance...hubby and I are pretty illiterate. I know that we will be paying the loan people about $6000 for loan fees for the construction loan, which seemed rather high, plus we will have to pay the interest on all money borrowed during construction process. This other way would eliminate the interest fees and apparently lower the loan fees as well. He says it is done this way often and the escrow people are familiar with this. Does anyone have any advice??? We could really use some!

Thanks in advance
Melissa

[rmurray]

$ 6000 in loan fees is entirely too high for a construction loan....Total should be about $ 1200 plus the interest at the market rate...

Sounds like your broker is dipping for 2 commissions....this should not happen..

I cannot remember all your circumstances...but..you and the dealer should be able to work this our...The trick is few dealers will invest there money into someone elses dirt....but..if you are putting down enough cash to cover the improvements and you own the land clear...as you imply..Your delear should have no problem working out the rest...If I were him and I were investing in permanent foundations, decks, skirting,,all things not recoverable if the worst happens...I would request a mortgage interest in your property...

If he will not co-operate...check with y9our local bank for short term finance..They should be able to do this with little cost and fair rates...This is what banks do..

Good Luck