Can i use the equity in the land included in the purchase of a new home to make the down payment?

I am looking to purchase a new home on a quarter section of land. The house and outbuildings have been appraised at $250,000 and the land has been appraised at $100,000. The asking price of the whole place altogether is $260,000. So, I was wondering if the appraised value of the property which is $350,000 can be used to acquire a 25% down payment $65,000 out of that. Essentially two mortgages. Is this something that can be possible?

3 Answers

Mortgage lenders use the purchase price as the determining factor for your qualifying down payment. SO if in this case the purchase price is $260,000. Your down payment requirements are based on $260,000.

If the appraised value really truly is $350,000, that is just instant equity for you, but can NOT be used as part of the down payment.

As a side note... real true deals like that rarely ever exist. If it was worth $350,000 - that is what they would be asking.

Correct, value on a purchase is the LOWER of the purchase price or appraised value. And just who does the appraisal makes a big difference. An appraiser hired by the owner might or might not deliver a completely unbiased estimate of value. You don't mention how many acres of land are included, but I have found that property owners often overestimate land values....."my neighbors sold a three acre tract for $15,000, and I have 30 acres, so my land is worth $150,000"

Ted makes some good points as to the true property value. That being said, however, you cannot use any equity in a property for the initial loan. But after the loan has "seasoned" (which is often 12 months), you could refinance and at that point the equity in the property is available.

But, you must understand that if the property is all under one tax id number, any land above and beyond what typically comes with a home that size will be considered excess land and will appraise for less than if the land was on its own tax id number.