HoosierBred, I will let you know we just went through this entire process about 2 months ago, but we are located in Central Ohio. We went through First Federal of Lakewood, but I think they only service Ohio. It looks like you are going with local banks which from what we have learned is the best route because they offer the most competative rates! Our bank is giving us 1 year to complete our build, we closed on the loan on the 23rd of December. We ended up with a rate of 3.39% and that is during the build and will be our final rate after the home is complete. We wanted to get out of PMI with 10% down so they broke our loan into 2- which is 80/10 thats saving us 300 dollars a month on PMI. With our bank we did have to have a purchase agreement signed and the builder was involved with the financing because they had to have the floor plans and costs and upgrades so they could do a paper appraisal (this was a one time close.) The appraiser actually went to our builders model to see the finishes and the quality of build and our appraisal came in 57k over what we are paying for the home including land. Now also what I have found out is many places charge a higher interest rate during the build sometimes 5-6% because you are paying interest only during the build, and then will lock you in at what ever the current rate is at the completion of the home. I do suggest taking a look at many places and finding out how their programs are structured and then once you find one that works best for you then doing the application! We did look into farm credit, but their rates were higher thank FFL, and they required 20-30% down with a back end DTI of 36% and with our current car leases we were 3% away from that mark. As well we had 20-30% down but we wanted to set asside a bubble for overages and we are also wanting to put an inground pool in and didn't want to finance that portion because a pool really doesn't add much value, other than pleasure. Hope this helps some (sorry I am not in Southern IN) -Clayton

I'm no expert but based on the fact that mortgage rates are currently at near historic lows and the government is pumping billions of dollars of new money into the economy (all those stimulus package bailouts), I think we're going to start seeing inflation VERY soon - double digit inflation in fact. If so, mortgage loan rates will rise with inflation. My personal suspicion is that your banker also foresees inflation coming and he doesn't want you to lock in today's low rates by getting a one-time close loan because such loans are very tough on the lenders. Your banker may look for the "best rate" available for you when your construction is done, but I strongly suspect that "best rate" won't be nearly as good as what you can lock in right now with a one-time close. Keep in mind that your loan is a business transaction for the bank. The bank wants to make money off of it and your banker has the bank's best interests at heart, not yours. As for possible over-runs in costs, if you're doing a "fixed price build", the only cost over-runs should be from "change orders" and I highly recommend paying for any and all change orders "out of pocket." That is one sure-fired way to keep yourself from going overboard on changes. LOL!

Hello Ellen J, It seems to me that you have two kinds of debt, possibly three. You bought a large asset that very few people are able to pay for with cash, namely a home. It will be an asset that will provide benefit for years, may go up in value. You paid for it with a large mortgage - I note that the amount of the mortgage was close to the purchase price, so you had a minimal down payment apparently. You didn't refer to student loans, which are a major debt carried by many youngish people. They, too, are an investment from which one expects to receive a benefit for many years. Consequently one can justify paying for it over an extended period - though the longer time that it takes, the lower standard of living one will enjoy throughout that period, due to ongoing interest costs. However - how long are you willing to pay for a loaf of bread, a night out on the town, or substantial repairs to your vehicle? Thirty years? The life of a mortgage? Most credit card debt is incurred to purchase things or services that we use up right away, or over a short period. If we pay off outstanding balances right away, we are living within our means, but if we carry outstanding balances owing over a period, we are condemning ourselves to living less high on the hog in future than now, for we enjoyed that dinner out tonight, but are going to continue to pay for it for months, even years. An extra cost is that which we pay in interest on that loan. If we carry the outstanding balance over the end of the year, then we will live less well next year, for we have that interest added to the debt, every month. With credit card debts, the rate is high. And almost always non-deductible. It seems to me that you should resolve to go into emergency saving mode and pay off those current debts as soon as possible. I am not in favour of adding them to a mortgage, thus paying them over 30 years or so. Do you want to be still paying for a loaf of bread in 2017 that you ate in 2006? I think not. I am reluctant to suggest that you make your savings plan drastic, as I gather from your message that you and hubby are not entirely in agreement as to the way to handle this issue, so you may well have less than enthusiastic agreement from him as to how to deal with this issue. By the way, I agree that you should plan to pay for stuff in cash, refusing to use the credit cards. Keep one in hand, though, in case of dire emergency need. But make sure that you use it for nothing else. Are you a kid or a grown up? I have some reservation about using part of hubby's bonus for emergency fund, though as a personal financial advisor I tell people all the time that they should have one as a high priority item in their financial agenda. However, if you are paying the 18% - 28% or so interest rates on current outstanding credit card balances, doesn't it make more sense to use most of the available bonus to pay down those current debts, knowing that the one or two credit cards that you have on hand can be used to cover emergencies - and you won't have to start paying interest on such debts until you incur them, but you're paying high rates on current debt now. Good wishes for making the best decision in this circumstance, and for having the self-will and courage to see it through. Good wishes for learning how money works. It's an interesting hobby - and one of the few hobbies that pays well. If you don't boss your money - it'll boss you. ole joyful

@Cpartist - Yes, a watertight habitable shell, with plumbing and electrical hook ups. I will be installing the fixtures, ie: showers, toilets, tubs, lights, etc. myself. I know how to do a lot of the interior work so I don't want to take out more money than I need and go into debt paying someone to do work I know how to do. @ B Carey - I think what I am asking for is technically called a "Shell only loan," but I am finding that term is being interpreted differently by different people. So what I am looking for is the funding to complete phases of the project, even if I want to hire subcontractors to help with some of the work. I guess I want to go into as little debt as possible. I'd be willing to do a true "owner builder" loan that is financed by the bank by taking out a larger loan and just using the contractors for the really serious portions (Foundation, electric, framing, etc), and then using the rest of the money to finance the work I want to do on my own. That would probably actually be best. I am in my 20s, I don't have a 401k. I just sold the home I did have for $525k. I have gotten approved for a personal loan already, however, (1) The bank caps their personal loans at $35k, and (2) I would prefer to take out a loan that turns into a 15 year mortgage because the interest rates are a lot lower than they are on unsecured personal loans. I purchased the land for $50k but I do not know how the bank would value the land. Can you explain the thought process behind taking out a land loan on land I already own? Thanks for the response