Home building questions

I agree with the above post. Try Farm Credit Service of your state. They work with all the loans that won't match the banks' cookie cutter. They do land loans over 40 acres (banks dont do that anymore). They do equipment loans for tractors and hoes and dozers and such. Also they do loans for improvements as well as homes. My slight dealings with them in the past have been very pleasent compaired to the banking automatons. They are somewhat more in touch with what you need. Good luck!

I just ran into this earlier in the week, while trying to procure a 5500 dollar loan. I own one house (should be sold in next month of so) and have 2 plots of land and a motor home. (I only mention that because it plays in the scenario) I don't want to "secure" the loan with my house, because of the impending sale, so I asked the mortgage company to consider the motorhome (valued around 10K) or the 2 lots (one with a garage on it) for securement. The loan officer said he would get back to me. I was sort of excited to hear what he would say as I have a pretty good FICO score and sort of wanted to take my credit for a spin so to speak. When he called back he said, "we can definitely do the loan" and started spitting out payments to me. As he was speaking something didn't add up. He asked "do you want to come in and pick up your check?" I said "Hold it buddy, what's the interest rate on that loan?" [silent pause] 22.9% [angry huff from me] WHAT?!?!? 2.2% more and that's called LOAN SHARKING! Why in the world is it that high? I have a stellar credit record, what's the deal? It's a personal loan and not a home equity loan. I said, what about securing it with the motor home or the land or both? He said, "we're not intersted in doing that". He said no one else would do any better. I asked if he was willing to put his money where his mouth was and if he would match any other rates I got. He said no, I just want you to know your approved. I thanked him and told him I would call him back if I couldn't find anything else... I need the money on top of all my cash that I have to get the house I want to buy. SO off to my bank on monday... er tuesday as it's MLK day here. I would think THEY would take the land or the motorhome, but maybe I am wrong.

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must be your state regs... when I aplied for a loan of that type if it wasnt recorded in the courthouse as a lien it was considered "clean", the didnt require any of that... sounds kinda fishy.

if you are in the US I dont reccomend you go into debt right now.... bad time to be indebted to the state or a bank.

Hi,

Someone asked why I don't sell right now. I have two reasons, one is my son who is three years away from graduation and wants to finish school here. My mom is elderly and has a property here and I manage that for her. She has lived here most of her life and she doesn't want to sell everything and move. But would if I insisted and that is kinda selfish. the other reason is in five years or so I will be eligible for retirement from my job, so want to stay long enough to be able to draw against that when I get old.

I figured that if I had a house completed on the property, the property value would increase at least as much as the investment of building on it. Property values here have not gone down in the last 25 years, no matter what the economy does. People move here for recreation, retirement and to raise children. One hour from Altanta, one hour from Columbus, and so many people here work in those areas. Excellent doctors, hospitals and good roads. Taxes are devilish though unless you put the land in a conservation program. We've had a steady increase in people moving from up north and from out west to here, and land prices have steadily increased as a result. I'd worry if it were an "overnight" increase, but it is just a general upward increase over many years with no sign of leveling off anytime soon. Anything liveable with a house on more than five acres is nearly impossible to find unless you go several miles out of town, close in like I am, prices are twice as high. I've owned the property since 86 and have watched most of the large farms be subdivided. right now there are three of us on this road that have more than an acre, the rest is subdivisions. Kinda a shame, but that's the way it is.

Figure when my son graduates and my mom passes away, I'll move (unless I can drag my mom off her farm, which I doubt).

In the meantime, I'd like to have something to live in that isn't under a constant state of construction. After awhile, you just plain get tired of living with dust, sawdust, building materials stacked everywhere, and also not to mention, every spare minute is spent working on the house.

Guess I'm reaching my limit with that, I'd like to be able to have my garden, ride my horses more, and go on a vacation here and now for a couple of days without thinking "I should be home laying tile" or something.

Like I said, where's that Ed McMann when you need him? ha!

Sidepasser

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Be yourself - no one can tell you that you're doing it wrong!

lendingtree.com or dietec.com let um compeate for your buisness

If you go to Farm Credit, be very careful. I had looked into buying a house through them and the catch is... you can't profit from sale of the property. Rules change all the time, but that one is a doozy.

If land is so valuable where you are, can you sell off your property in one acre (whatever the minimum is in your municipality) parcels? Then, you'd have enough money to get back to work on the house. Could you sell the property right now and rent in the same school district?

Move in a mobile home?

well renting is an option but rent in a liveable house starts at $750 per month for a small house and goes up to $1200 or more for a 3 bedroom/2 bath on a lot. That is what my mom does now, buys houses, refurbishes them and rents them and I manage those properties for her. not too many rental units are available unless it is an apartment and I just couldn't live in an apartment unless there was no other option.

Mobile homes are out as the zoning commission will not allow one in my area - says it brings down property values. I tried that route and even when to three different hearings and was turned down flat each time.

So will continue to search for a loan and if I can't find one that has decent interest rates, then I will keep building like I am now, and in just a little while longer, the whole thing is paid for in full. It's funny, if I were willing to take a high interest rate loan, I'd been through with the conversion by now..but why should I pay a premium with excellent credit?

So anyone who's even remotely thinking of doing something like this, investigate all options before jumping in or make sure you have plenty of cash with a huge cushion just in case.

Thanks everyone for your help, I am going to talk with Farm Credit Services this week as today is a banking holiday here in GA.

Sidepasser

__________________
Be yourself - no one can tell you that you're doing it wrong!

Try doing a search for "owner-builder loan". Here's one place I came up with:
http://www.ubuildit.com/services/mandl/

Hope that's helpful!

No! This is not even a little bit true. The bank does not 'technically own the property' that it mortgages. You own it entirely under the law. The bank gets a lein on it. It is not anywhere near the same thing. Even if you finance 100% you still own the property and the bank does not.

-Jack

Find a mortgage broker who is accustomed to dealing with strange loan situations. A good mortgage broker will know the detailed criteria for dozens of different lenders and will know right away what trees are or are not worth barking up.

Before plunging ahead with any kind of 'revocacble living trusts' or dodges like that, talk to a real estate attorney. He or she may know of a better way to get the job done.

Note also that a bank has no way of knowing that a subcontractor or materials supplier to whom you paid cash 10 years ago even exists. Get whatever affidavits you can and don't worry about the ones you can't. If the guy is dead and unable to sign an affidavit, then I doubt he's going to be saying anything to the bank. If there are at least a couple of suppliers with whom you've done a lot of business with lately (ie they will know who you are and be happy to oblige) then that should be enough. So long as you could have plausibly obtained all of the materials for your project from them. Between Lowes and Home Depot, you should be covered.

There are banks out there that will loan money to owner/contractors. You will pay higher interest on the loan and they will do a thorough inspection.

I think that this business of subdivision is a bluff. I can see how it would be a safty mechanism for you to have the land in 2 seperate parcels, but from the bank's perspective it only adds to their collateral if it is all one parcel. I strongly suspect that they will drop this requirement under pressure if everything else is going smoothly.

Alternatively, maybe you can get a loan using only the land as security. Don't even try to bring the value of the improvements into the deal. The downside of this approach is that you will pay higher interest and probably be dealing with a maximum 5 year term. Maybe you get a 5 year balloon mortgage based on the value of the land. Get the whole project done with that cash before the 5 years is up. Then you're no longer under construction and you can get a conventional 20 or 30 year mortgage which pays off the balloon loan. The risk here would be that maybe 5 years later (or 3 years or whatever you can get on the balloon) the lump sum of the principal comes due and you haven't finished the project yet.

Here's a calculator for figuring the costs of balloon mortgages:

http://www.mortgage-calc.com/mortgage/balloon.php

-Jack

Sorry, Jack but I am not speaking in pure lawyer type legal terms. I am speaking for all intents and purposes.

Just miss a few payments and see who owns the house... Who calls the tunes when you finance? You must do nearly everything to the banks liking. You MUST purchase insurance, use approved builders etc.

When my son had storm damage the check from the insurance company was payable to the bank AND my son. This is to make sure the repairs were done to the "banks" satisfaction. Both had to endorse the check to cash it.

I hate banks, I hate mortgages. You're right that it is better to own outright than it is to finance. But once you get through the hassle of getting a mortgage in the first place, there are basically just 2 things you have to do. Make your payments and maintain an insurance policy. Beyond that, you can do whatever you want and there's not a thing they can do. Paint it purple. Rent it out. Dance naked around the yard. Tear out a wall. Build a landing pad for UFOs. They can't do a thing to stop you. It's your house!

I send my check off every month to my mortgage company and that is the extent of their involvement in my life or my house. I do whatever I want in my own home and they have had no say. I can alter it, operate a business out of it, imrpove it, sell it, lease it or whatever I want to do. That's ownership. The big decisions are all in my court. Citimortgage is powerless to make any decsion whatsoever about my house unless I welch on my agreement and stop making payments.

You're right that the bank calls the tune when you finance. But once you close on the loan, you're the one in the driver's seat. 99% of the criteria that they looked at to give you the loan can then change overnight and there isn't a thing that they can do about it. That's why they are so careful about doling out money for construction in little increments. That's their only real power - withholding money. Once they've given it to you they lose all their leverage.

-Jack