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The most important criterion for your loan is the loan’s length of time. (We talk more about timing of lot loans in the section “Making sure the loan period is long enough,” later in this chapter.) Generally, your lot loan picks you based upon your qualifications. You may, however, need to choose between a fixed-rate loan or an adjustable-rate loan. Some lenders offer only fixed-rate loans where the interest rate stays the same for the loan’s life. These rates are generally higher than adjustable-rate mortgages, which have interest rates that move with a particular monetary index such as government treasury bills.

Some people believe a fixed rate can save you money because it protects you from rising interest rates. But if you plan on building in the next few years, you’ll be taking a construction loan that pays off the land loan (see Chapter 9 for details). Because you’ll likely pay off the land loan soon with the construction loan, using a fixed-rate loan isn’t likely to save you much money. Ultimately, you need to do the math and compare the various loan payment options over the length of time you anticipate before you start building.

Kevin’s recommendation is to always go with the largest amount of money you can borrow for the longest period of time with the lowest payment. Doing so gives you the most flexibility for moving into construction financing by keeping the maximum amount of cash in your pocket where you need it most.