Building a house with $400k construction loan?
geekella
7 years ago
last modified: 7 years ago
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7 years agogeekella
7 years agoRelated Discussions
Building a house on owner financed land, with FHA loan?
Comments (11)Red flags abound: - A newly built house, even a modular, isn't likely to be less expensive than an existing house (much less a "foreclosed shack"). I think you're using some fuzzy math here; for example, you may have underestimated costs in some places. The world just doesn't work this way. - If the FHA people won't loan you any more than the house + 10K, you shouldn't try to stretch yourself farther. Borrowing as much as the bank says you can borrow typically ends with you being house poor ... and you're talking about borrowing more than they say you can afford. - When you talk to the bank, you will have to disclose any other loans you're carrying. If you're doing an owner-finance deal, you must disclose it. That will change your finances and very possibly decrease the amount they're willing to loan you. - What you don't say speaks volumes: You don't say how much cash you have to put down. If the answer is "nothing much", you really can't move forward on this project. My best suggestion: Save. Work, scrimp and save, and then come back and buy the land outright in a couple years. THEN you'll be ready to build the house, and -- yes -- it will still be available. Once-in-a-lifetime deals aren't real....See MoreHome building Loan
Comments (12)To protect yourself you should educate yourself *before* you make any big decision. It would be a good idea for you to know the market value of your home-based on the 'sold' prices of homes like yours in your neighborhood. The situation you are talking about - with homes selling after a long time on the market, way below their asking price reflects sellers/agents not pricing the homes correctly for the current market. The builder you are meeting with sounds like a large one, they may have their own agents who will do a market analysis on your home to find out what they could likely get out of it. For them to take the risk of owning your home and the hassle of re-selling it they need to make some money. If they do not make 'much' on the sale of the homes they take in trade then you have to look at other areas where they are making their profit. Some builders will offer you financing-they may make a great deal of their profit from this avenue of income. You really need to shop other loans and compare fees, interest rates, loan structure etc. We had some problems in our area with builders offering financing packages to buyers with their 'preferred lenders'. The loans were above market interest, had higher fees and prepayment penalties. The builders in question offered incentives to their buyers to go with the preferred lenders-they would knock several thousand dollars off of their asking price, which of course was not a 'real' savings just a way to get a buyer to go with their loan program. When such loans are sold to larger banks the originator of the loans gets 'back end' money in addition to their up front charges because the terms favor the lender vs the buyer. Finally, even if the house trade in and the builder financing checks out, you still need to be comfortable with the builder's ability to build you the house you want with the level of quality you desire. To be honest it would surprise me if a large builder that offers these services and is building subdivisions would also build a single custom home on acreage or lot that you found. Perhaps I am overstepping here and should just stick to the original question but I'm reading between the lines a little bit... I feel a little concerned for you because it seems as if the convenience of having a builder buy your home and provide financing might be so attractive that you would jump on that opportunity without shopping around or really examining your options or the builder in question. Perhaps that would work out ok for you if you 'lucked' into the right builder and if the security and convenience of having some of the steps handled for you and not having to move twice is worth the higher cost you will pay. But then again you might choose the wrong builder for the wrong reasons. While the sale of your current home and financing your new construction are definately key to the success of the entire project, remember that the most important qualification of a builder is that they can provide you with a well built home. Perhaps you should get together with a good lender and learn about different ways you can make this work beyond the ones you have thought of so far. I hope that helps, and if I've misread the situation I'm sorry. :) Good Luck!...See MoreWhat type loan for building our new house?
Comments (3)We're considering a home equity loan or a construction to permanent loan. We have enough set aside to make payments for however long is necessary. I think we have to spend our own money before the loan money becomes available to us. At that point, the bank would become the "heavy". However the builder's contract stipulates the payment schedule. He told us this is not the way that banks usually handle building loans, but he always does it this way. The man has been in business for a long time and has a wonderful reputation. I know that can change. The builder's contract gives the following payment schedule: 1. Purchase lot and buyer gets deed to lot. 2. XXXX when house is framed and roof is blacked in. 3. XXXX when plumbing, wiring, heating are roughed in and the exterior veneer, or drywall is installed. 4. XX at time of completion of home. I didn't mention that this is a brand new subdivision with a few models to choose from. All exterior materials will be the same on every home....See Morejumbo construction loan with new construction ADVICE needed!
Comments (19)My husband and I ran into a similar problem when we had our big addition/remodel. What my husband did was contacted both the bank and the appraisal company and showed them our building plans and asked that they base the appraisal on the prospective build out. The bank worked with us. The residential lending officers actually visited our home on three separate occasions to ensure that we were in fact upgrading the home to the level we proposed we would, understandably they needed to ensure their money was going where it should be. So about midway through the project they increased our construction loan by 25,000, and 3/4 into the project they gave us the final 40,000 they agreed to lend us. This was still about 25,000 shy of our desired amount. In addition to our discussion with the bank, we sat with the contractor and asked where we could cut some corners. He offered us the opportunity to do some “homework” throughout the project which included cleaning up the work site at the end of the day ourselves and preparing the area for the following day, drilling holes in the framing to save a ton of time that we would normally pay the electricians 125 per hour to do, and the biggest savings was painting the house ourselves. You may not have the time or desire to do this much hands on but I gotta day not only did we save enough to complete the project, but we came in under budget enough to furnish a few of the rooms. Best of Luck!...See Morecpartist
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