How does collateral work on construction loans? (TX)

 In RealEstate

Hello, I’m going to be applying for a construction loan and want to use the land as collateral for the down payment. It should cover the 20% that the bank is asking for as down payment. How does this work exactly? Is the loan amount for the 80% only and if so how does that affect how the builder gets paid?


The builder quoted me around $190k for the construction. He said he could also raise his price to around $230k on paper so that we wouldn’t have to put any money out of our pockets for the down payment. Since, I want to use land as collateral for the down payment I’m having a hard time deciding if this is a good idea or how it would even work. Can anybody help? Thank you


Edit: It’s commercial property

submitted by /u/imrewn
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