Anyone have experience with building your own house / construction loan?

Midnight LJR

Midnight LJR

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Anyone have experience with getting construction loans and having your own house built?

We are looking at new houses and would like a bit of land, however most of the houses in the area we are looking that have land and older style, single car garages etc. The area does have some nice size lots around it that would be great with a more modern house. But not sure if it’s worth the headache of the building, since don’t have experience with that.
 
A few years ago there was a lot on the lake nearby for sale. We wanted it but it was hard to find anyone to give us a loan on unimproved land. Only found one lender at 8.5%. It got sold as we were trying to line up financing. Too bad, I could have doubled that $300,000 by now.

You can only experience it by doing it.
 
We did it too, got a loan from our credit union. I don't recall that being a problem but this was 2005/2006 when the housing market t was booming...at least here.

Nice thing is you get exactly what you want (with budget) floor plan, square footage, electrical outlets, light switches, finishes, cable tv locs...etc.
 
I built a house once. I got the builder to handle the finances in exchange for a higher down payment/deposit. They even bought the lot of my choice in a subdivision they weren't building in, but about 10 miles from one. I just got the mortgage and closed on it when it was finished, as if it was an existing home. They were a pretty large spec home builder in the area though, whereas a smaller custom type builder might not have the capital to do that.

I was going to build a house a couple years ago and get the construction loan myself. I ended up paying cash for the land, but I did talk to a bank about a loan on the land. The interest rate was around 7-ish, and the payments were based on a 10 term but with a balloon payoff after 2 years. So you finish the house and pay off the land loan with your mortgage within 2 years, or you pay the land off.

I didn't end up going through with it so I didn't get the experience of dealing with the construction loan during construction.
 
I haven't dealt with a construction mortgage since 1989. Back then, the mortgage company was strict on who was doing the work. They wanted licensed contractors, but there was no such thing in my area. Most contractors want the whole pie, and don't like the owner doing anything, because the contractor is ultimately responsible. If you act as the general contractor, and manage all the different trades yourself, you may save some $.
 
Construction loans are at a high rate and you only pay for interest during the construction. You can pay on the principle if you like. It will turn over to a home mortgage at the end of construction for the amount you used. It may be better to purchase the land first. They will want to be sure the loan to value is there. Get the land cheap if you can.
Also, keep in mind about utilities and cost to get to said property.
 
I built a home in 97 on property I owned outright (banks like that) Since it was a custom home I hired an architect and spent probably 6 months on design and budgets. After that I found a local builder based on word of mouth and hired them. They prepared a legit budget for the mortgage application and we used a construction to 30 yr convertible (I think they called it) mortgage. Broke my ass for 5 months getting her done and all worked out. My end included plumbing, heating, A/C, low voltage wiring, light fixtures and site maintenance/cleanup.
 
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