Building a house & Construction Loan help needed

[jj3044]

Hi everyone,
My wife and I are looking to potentially build a house. There is an absurd lack of houses on the market right now in Rhode Island in the communities we like, and that is driving our desire to build. Any help would be appreciated! We have questions in 2 categories. The building process itself, and how construction financing typically works.

Building process:
Any general tips?
If you built, would you do it again?
What (if any) problems did you have with your contractor? What should we look for in a contractor?
Is it better to buy land first then seek a contractor out, or the other way around?
In the end, did it cost more or less than if you had bought an existing property with similar specs?
How much did your property overrun the budget (%)?
Is there usually room to haggle?

Financing:
Any general tips?
I hear there are a couple of different types of construction loans... one which you really don't start paying until the construction is complete. Are these loans tough to come by and would they carry a higher APR?
Can you start the process before having 20% of the estimated cost to put down? We are approaching 20% of our target, and will have it within the next 6 months.

Thanks!

[Phatscotty]

save up as much as you guys can.....so that you will have to borrow less.

How is the market out your way? how many days does the average home stay for sale on the market, and what is the median home price out there?

[jj3044]

save up as much as you guys can.....so that you will have to borrow less.

How is the market out your way? how many days does the average home stay for sale on the market, and what is the median home price out there?

Yup, we have been saving nonstop since we got married. I (we) own a 2 family house currently, and rent out the other apartment. The plan is to keep the current house and rent out our apartment also and let this house pay for itself.

In the area we are looking in, median sales price is about $340,000, down from $440,000 in 2005. Houses are staying on the market a long time generally... hundreds of days (literally). However, there are very few in the range we are looking in, which is around the median price.

[Symmetry]

Hi everyone,
My wife and I are looking to potentially build a house. There is an absurd lack of houses on the market right now in Rhode Island in the communities we like, and that is driving our desire to build. Any help would be appreciated! We have questions in 2 categories. The building process itself, and how construction financing typically works.

Building process:
Any general tips?
If you built, would you do it again?
What (if any) problems did you have with your contractor? What should we look for in a contractor?
Is it better to buy land first then seek a contractor out, or the other way around?
In the end, did it cost more or less than if you had bought an existing property with similar specs?
How much did your property overrun the budget (%)?
Is there usually room to haggle?

Financing:
Any general tips?
I hear there are a couple of different types of construction loans... one which you really don't start paying until the construction is complete. Are these loans tough to come by and would they carry a higher APR?
Can you start the process before having 20% of the estimated cost to put down? We are approaching 20% of our target, and will have it within the next 6 months.

Thanks!

I've not done this myself, but my parents did it. You want a good construction manager first and foremost. That's the bit you don't want to cut corners on, or god help you, think you'll be able to do yourself.

[Phatscotty]

save up as much as you guys can.....so that you will have to borrow less.

How is the market out your way? how many days does the average home stay for sale on the market, and what is the median home price out there?

Yup, we have been saving nonstop since we got married. I (we) own a 2 family house currently, and rent out the other apartment. The plan is to keep the current house and rent out our apartment also and let this house pay for itself.

In the area we are looking in, median sales price is about $340,000, down from $440,000 in 2005. Houses are staying on the market a long time generally... hundreds of days (literally). However, there are very few in the range we are looking in, which is around the median price.

what is your states unemployment? I'm gonna guess RI is running deficits right? (just wondering if any other external factors are out of whack)

If I'm not mistaken, generally speaking if houses stay on the market for longer than 120 days, it means the market is contracting and prices are likely to continue to drop, and vice versa for a market that averages less than 120 days. There is also something to be said for the %'s of houses on market that are over 500k, and under. The median price partially reflects that, but when the ratio of houses over 500k to under grows too large, then you can't use the median index so reliably as a gauge for what is happening to the prices of homes under 500k.

I know this is not the east coast and that all your prices are higher for everything, and Minnesota's economy has generally been one of the healthiest throughout this recession and we are currently running a surplus (DTOM ) ....but our median sales price actually rose recently for the first time in a long time, but on the other hand, our rental market is still white hot. The top rental placement agencies are boasting filling empty houses on averages of 7-10 days. So check the rental market too. If it's hot there chances are the environment to get a loan and build a house should continue to become more favorable.

Interest rate just hit an all time low, at least since we started keeping track around 1970, so if you have good credit the timing could not be better for a loan, but in my opinion I think the rate will still go lower for a myriad of reasons. But if you are doing this the smart way, and it sounds like you are, than the more you prepare financially for this the less concerned you will have to be about the loan side of it.

Timing is EVERYTHING!

[codeblue1018]

We built last August and moved in January. All we had to do was make a 10k deposit; no other money was required until closing. We did a 20 year fixed mortgage at a rate of 3.9%. We also put 20% down making our loan amount $250k. The taxes in our sub are somewhat high at $4500 putting our monthly payment with escrow to $1900.45.

The only tip I'd provide would be once your house is insulated and prior to drywall, put additional insulation on the walls in your master bedroom, the other bedrooms/ bathrooms and powder room if you have one. It's very inexpensive and the reason for this is that the builders only insulate where code requires them to do. The areas I mentioned aren't required ones and what it does is sound proof those areas; very smart to do.

What id also mention is to purchase the upgrades you want; don't nickel and dime as over the course of your mortgage, the payment is barely noticeable as opposed to doing things after the fact who h requires up front money.

Good luck.

[jj3044]

what is your states unemployment? I'm gonna guess RI is running deficits right? (just wondering if any other external factors are out of whack)

I think unemployment is around 11%... I know it is higher than the national average. Also, a lot of cities are not doing well (although the town we are looking in is doing well).

We built last August and moved in January. All we had to do was make a 10k deposit; no other money was required until closing. We did a 20 year fixed mortgage at a rate of 3.9%. We also put 20% down making our loan amount $250k. The taxes in our sub are somewhat high at $4500 putting our monthly payment with escrow to $1900.45.

Did the initial $10,000 deposit become part of your 20% down once the house was built?

Good thought about the insulation. I have read that same point a couple of times!

[codeblue1018]

what is your states unemployment? I'm gonna guess RI is running deficits right? (just wondering if any other external factors are out of whack)

I think unemployment is around 11%... I know it is higher than the national average. Also, a lot of cities are not doing well (although the town we are looking in is doing well).

We built last August and moved in January. All we had to do was make a 10k deposit; no other money was required until closing. We did a 20 year fixed mortgage at a rate of 3.9%. We also put 20% down making our loan amount $250k. The taxes in our sub are somewhat high at $4500 putting our monthly payment with escrow to $1900.45.

Did the initial $10,000 deposit become part of your 20% down once the house was built?

Good thought about the insulation. I have read that same point a couple of times!

The 10k isn't part of the down payment or 20%. It just took off the top on the final sales price. Like most builders, if I were to back out of the deal after signing the contract, I would have lost the money. 20% wasn't required, I could have put at low as 3% down.

[Symmetry]

what is your states unemployment? I'm gonna guess RI is running deficits right? (just wondering if any other external factors are out of whack)

I think unemployment is around 11%... I know it is higher than the national average. Also, a lot of cities are not doing well (although the town we are looking in is doing well).

We built last August and moved in January. All we had to do was make a 10k deposit; no other money was required until closing. We did a 20 year fixed mortgage at a rate of 3.9%. We also put 20% down making our loan amount $250k. The taxes in our sub are somewhat high at $4500 putting our monthly payment with escrow to $1900.45.

Did the initial $10,000 deposit become part of your 20% down once the house was built?

Good thought about the insulation. I have read that same point a couple of times!

The 10k isn't part of the down payment or 20%. It just took off the top on the final sales price. Like most builders, if I were to back out of the deal after signing the contract, I would have lost the money. 20% wasn't required, I could have put at low as 3% down.

Get a construction manager dude.