To Finance, Our Not to Finance...an Overwhelming Question
Whether Tom and I will be able to start construction on the house this year seems in doubt. The last two months we've been investigating some different financing options. Tom called banks and visited two. I checked books out of the library - Idiot's Guide to Building Your Home, Building Your Own Home for Dummies, etc. Reading up on the sections that discussed construction loans and financing. We went and spoke to a mortgage broker, which helped me get a better handle on what we're endeavoring to do.
Here's the truth. We have many things that aren't in our favor. First, we want to build in a rural area, on a piece of property that is off a dirt road, a portion of which is not county maintained. Second, there aren't any comparable houses in our immediate vicinity, which can, and probably will, impact the appraisal. Third, we're having to pay for a lot of things that probably wouldn't be a factor if we were in an urban area. Like putting in a well, having electricity pulled into the property, cutting in the road, putting in a septic tank, etc. Also of concern...what will the house plans appraise at? Will it even be enough to build the project?
A couple weeks ago we moved forward with the financing. We did a loan application with a financial institution in town that offers one-time close new construction loans. This means that we'd get the construction loan and, after the house is built, the loan rolls automatically into the permanent house loan, the mortgage. This eliminates some of the expenses of having to close twice - once on the construction loan and once on the house loan. It also eliminates the risk of factors impacting the appraisal and value of the project between the two loans, potentially impacting our ability to get locked into the permanent loan.
Well...this past week...we learned that our loan application is approved BUT with some stipulations. The bank will only finance 75 percent of the project. We had been hoping for 80. They also want us to have four months of mortgage payments in reserve...plus the $18K we'll need to close. Needless to say, we do not have that much cash sitting around at the moment.
We're thinking through a lot of different options right now. Do we do some small, minor projects to keep the permits alive and keep the project moving forward. Such as putting in the well, having the road to the building site cut in, having the electricity pulled in. Or...the project right now includes the house, a detached three car garage and the courtyard wall. Do we drop the garage and/or the wall and just build the house. Do we wait a couple years, save up the money and start the process all over again when interest rates will most likely be higher and the cost to build the project will most likely have gone up? Do we try to build the house ourselves, serving as our own contractors. Honestly not my favorite option.
We've even spent several hours this long holiday weekend looking at manufactured homes online. Should we just throw out the plans and put a manufactured home on the property?
There's been a few times in this process when we could have stalled out but things kept moving forward. When the overwhelming task of getting financing came up, we decided to just keep going forward until we hit a locked door. To be honest I'm not sure where we are right now - a locked door or just a waiting area. Lots of decisions to be made in the coming weeks. I'll keep you posted.
And if you're inclined, prayers for us to have wisdom and discernment as we move forward would be much appreciated.
Here's the truth. We have many things that aren't in our favor. First, we want to build in a rural area, on a piece of property that is off a dirt road, a portion of which is not county maintained. Second, there aren't any comparable houses in our immediate vicinity, which can, and probably will, impact the appraisal. Third, we're having to pay for a lot of things that probably wouldn't be a factor if we were in an urban area. Like putting in a well, having electricity pulled into the property, cutting in the road, putting in a septic tank, etc. Also of concern...what will the house plans appraise at? Will it even be enough to build the project?
A couple weeks ago we moved forward with the financing. We did a loan application with a financial institution in town that offers one-time close new construction loans. This means that we'd get the construction loan and, after the house is built, the loan rolls automatically into the permanent house loan, the mortgage. This eliminates some of the expenses of having to close twice - once on the construction loan and once on the house loan. It also eliminates the risk of factors impacting the appraisal and value of the project between the two loans, potentially impacting our ability to get locked into the permanent loan.
Well...this past week...we learned that our loan application is approved BUT with some stipulations. The bank will only finance 75 percent of the project. We had been hoping for 80. They also want us to have four months of mortgage payments in reserve...plus the $18K we'll need to close. Needless to say, we do not have that much cash sitting around at the moment.
We're thinking through a lot of different options right now. Do we do some small, minor projects to keep the permits alive and keep the project moving forward. Such as putting in the well, having the road to the building site cut in, having the electricity pulled in. Or...the project right now includes the house, a detached three car garage and the courtyard wall. Do we drop the garage and/or the wall and just build the house. Do we wait a couple years, save up the money and start the process all over again when interest rates will most likely be higher and the cost to build the project will most likely have gone up? Do we try to build the house ourselves, serving as our own contractors. Honestly not my favorite option.
We've even spent several hours this long holiday weekend looking at manufactured homes online. Should we just throw out the plans and put a manufactured home on the property?
There's been a few times in this process when we could have stalled out but things kept moving forward. When the overwhelming task of getting financing came up, we decided to just keep going forward until we hit a locked door. To be honest I'm not sure where we are right now - a locked door or just a waiting area. Lots of decisions to be made in the coming weeks. I'll keep you posted.
And if you're inclined, prayers for us to have wisdom and discernment as we move forward would be much appreciated.
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