New home buying/building questions

[Chris_The_Battery_Man]

So,



If all goes well, in about the next 1.5-2 years, I will HOPEFULLY be ready to become a home owner. My goal, is to be 100% debt free, before I take on the responsibility of owning a home.


My question to you older and wiser people, is, what are my options(if any) on building a home? I know that I have to own/buy land, and all that. But what I cant find a straight answer on, is if a first time home buyer, can get a building loan, and a loan for the land. And I am not sure I want to save money for a few years to do it in cash, although that would be a good idea.


I have a little bit different outlook on life and owning a home. After some poor financial choices when I was younger, I know well enough, that I want to own as much as I can outright. And the thought of paying for a home, for 30 years, scares the hell out of me. Ideally, I would like to build the home myself(yes, ME build it, aside of stuff like foundation and what not). That way, I appreciate it more, there is a good story to it, and it is less money in the end. Also, I can pay off any loans on it, way quicker, then own the place outright. I know what the building materials cost, and as long as I am in a place to invest some sweat equity, it would be a good investment. Plus, it would be a much better built home, with more options that these mass produced ones these days.


Any input is appreciated. I know it's a ways out, but I just like to do all my homework. Plus, I am sure some of you can offer cool ideas.

[JohnRobHolmes]

Basically you want to have about 20% of the home value in cash before starting the process. This will allow you to get rid of PITI payments on the final loan, and also allow you to get low financing rates. You will need to talk to some banks to get answers pertinent to your situation. Approach them as a first time home builder looking for financing information. Your state may or may not have regulations regarding who can build homes, do wiring, plumbing, etc. You will probably have to pull permits as well, your city hall or county seat will be the resource to start with.. They can also point you in the right direction for the full process, and may have all the info you need for the legal aspect of building. Then you have to deal with getting it inspected at the end, and getting it to pass inspection can be a huge pain if you don't know the ropes of your area.

What you may consider is finding a realtor that is also a spec home builder. They can guide you through the process and give you more resources, and will be more willing to help if you buy the land through them. Additionally you could hire somebody to do the paperwork and guide you through the process while you fill in the labor gaps. Basically a supervisor that doesn't contract any work.

[JeremyH]

80%/20% split loans also dont require mortgage interest payments for the bank holding the 80% loan (because you are basically still getting the 20% fronted...just by another bank).

[C*H*U*D]

Originally Posted by JeremyH

80%/20% split loans also dont require mortgage interest payments for the bank holding the 80% loan (because you are basically still getting the 20% fronted...just by another bank).

This is how my mortgage is set up. I refinanced to an 80/20 loan to drop the PMI and lower my payment. Since I was used to paying that set amount anyway, I continue to pay it and apply the rest to principal. Both loans are ARM's so my rate followed the average right into the basement.

One thing to consider Chris is what kind of person you are. By that I mean do you finish what you start? I've seen so many houses that get finished "just enough" to be livable but never really done. This goes on for years with tools and supplies strewn about the house.

I know this first hand....you should see my 7 year bathroom project

[microgoat]

Get a copy of your local building code, and see if you want to deal with all that. If you decide you do, get the permits and go for it.

I recommend living close by while you build, and you'll need a good secure shed to keep your stuff in. Punks will break into the place to steal/break stuff.

Also plan on it taking twice as long and costing twice as much as you think

On the other hand, there's a lot of cheap homes out there now. Look into something that's already built and you'll probably save a lot of money. Then rehab/add on to suit your taste and budget. My old roommate did that, added a second story and 40x60 family room to his house, while he was living there. Place is fawking huge now.

[JeremyH]

And another bit of advice....make sure this is what you want and you are willing to stay there for at least 5 years. I bought a house, then moved out less than a year later to take a good job. It cost me about 10% of what the house was worth (6% realtors fees, 4% closing).....biggest damn check I've ever written......but it was well worth it.

Originally Posted by microgoat

Get a copy of your local building code

Yes....and speak with some of the inspectors in your area. My dad inspects buildings and there are a few types of inspectors....those that will just fail the house and walk away...and those that will tell you what you have done wrong and how you need to fix it. My dad is the latter...and most contractors love him for that.

[punkfan]

I built my own house about 1.5-2 years ago. In my case what the bank did was to give me the construction loan after they had secured permanent financing based on the value of the estimated finished house/land. I have been in the construction industry my whole life but they also asked for a resume so I could act as my own general contractor. If you dont have that experience you may have to get a general contractor to oversee the project. If you have a friend that is a general you can get around that without paying someone. That differs from bank to bank. I have alot of info that may be useful to you, but it will be to much to type out. If you are interested PM me your # and i would be more than willing to tell you what i know.

[greencrawler]

The only thing I would suggest is to go for the shortest payment term as possible. The less time you pay the less interest the bank gets Make sure the bank/credit union you use gives you all the information as to whether they intend of selling your loan and the option of keeping your loan in house. The bank I used when I bought my house give me the run-around and ended up keeping loan in house and saved some on monthly payment as well as 15yrs on the note Needless to say I wasn't happy that they still wanted me to consider them selling my loan... I refinaced 2 yrs later