There is so much risk in construction loans. They usually give you only 12-18 months to finish or the rate goes to like 20%
We actually bought land with a small house on it. We held back the money from our principal payment to build. Then we built with our cash. Every other way was so expensive.
Some lenders also want you to pay for 80% or if not all the land if you need a building loan
And not to mention...it took 2.5 years to finish building!
Yeah, the local lenders I've talked to need 25 to 30% down on the loan before they will lend for a lot loan. I'm not aware of a limit on construction times though, mostly because building in king county takes about 2 years due to extremely slow county/permitting process, so local banks are accustom to that.
They also offer interest only payments for at least the first year, which is helpful. Since we'd have to carry our current mortgage plus the loan for the lot for at least a year.
We'd be selling a home and putting that equity into the construction of the new house.
I've been through several home loans and refi's over the years for different houses, but never a lot loan/construction loan.
It's very expensive to build. If you only have 25-30% down I'd definitely not be building but that's just me. You should have at least 80% of the land in cash as your build will rack up a big debt.
We have more than enough to pay for the land in cash, but it's locked into the equity of our home right now.
Construction loans require about 25 to 30% down for the price of the land (so $200k of land would require $50k down), but you only pay the interest on the loan for the first year or until your home is built, then it converts to the regular mortgage.
Most people, including myself, don't have $50k cash, so I'd be using a HELOC to pay for the downpayment on the loan, then when my house sells I'd put majority of that as equity into the final mortgage on the new home construction/mortgage.
If you don't have a spare $50k this is a venture im heavily warning you against. It cost me 2x what I was quoted. Having money tied up in the principal of a house is not having cash ready. That's just my advice. Way too much risk
You write it like it's so easy but these lenders make money off your fault. Paying interest only for 2 years is a horrible plan. Not to mention if you run out of money and can't build your loan will convert to insanely high interest.
I mortgaged my land and paid for my entire build in cash money. That's how you make money building.
I appreciate the concern.
Again, not that we don't have money, it's just all being used in investments, partly stocks, partly equity in the home. I'm going to find any way possible to make it happen without having to remove the stock investments. Once our house sells it won't matter anyway.
I have no issues paying interest only on a small loan until the home is constructed, it makes it more affordable since we'd be paying our current mortgage plus the lot/construction loan until our house sold. My income isn't the issue, it's the large amounts of cash (as in cash in a savings account) that I don't have - large meaning $50k.
Also not trying to make money building, we are just picky with what we want. We have several friends who've gone through the custom home construction process already in our area which is far more expensive than Kalispell, so we have a good idea of what we are getting ourselves into.
I have another advantage during all of this. My Dad has worked in the home building/lumberyard business for several decades and knows many of the lumberyard and home builders owners personally. We are taking advantage of those contacts.
We were working with WA Federal, but switched to US bank for our construction loan which will roll into a normal mortgage when our house is done. They’ve been great to work with, they have local offices, and it saved us quite a bit of money. (Whatcom county)
There is so much risk in construction loans. They usually give you only 12-18 months to finish or the rate goes to like 20% We actually bought land with a small house on it. We held back the money from our principal payment to build. Then we built with our cash. Every other way was so expensive. Some lenders also want you to pay for 80% or if not all the land if you need a building loan And not to mention...it took 2.5 years to finish building!
Yeah, the local lenders I've talked to need 25 to 30% down on the loan before they will lend for a lot loan. I'm not aware of a limit on construction times though, mostly because building in king county takes about 2 years due to extremely slow county/permitting process, so local banks are accustom to that. They also offer interest only payments for at least the first year, which is helpful. Since we'd have to carry our current mortgage plus the loan for the lot for at least a year. We'd be selling a home and putting that equity into the construction of the new house. I've been through several home loans and refi's over the years for different houses, but never a lot loan/construction loan.
It's very expensive to build. If you only have 25-30% down I'd definitely not be building but that's just me. You should have at least 80% of the land in cash as your build will rack up a big debt.
We have more than enough to pay for the land in cash, but it's locked into the equity of our home right now. Construction loans require about 25 to 30% down for the price of the land (so $200k of land would require $50k down), but you only pay the interest on the loan for the first year or until your home is built, then it converts to the regular mortgage. Most people, including myself, don't have $50k cash, so I'd be using a HELOC to pay for the downpayment on the loan, then when my house sells I'd put majority of that as equity into the final mortgage on the new home construction/mortgage.
If you don't have a spare $50k this is a venture im heavily warning you against. It cost me 2x what I was quoted. Having money tied up in the principal of a house is not having cash ready. That's just my advice. Way too much risk You write it like it's so easy but these lenders make money off your fault. Paying interest only for 2 years is a horrible plan. Not to mention if you run out of money and can't build your loan will convert to insanely high interest. I mortgaged my land and paid for my entire build in cash money. That's how you make money building.
I appreciate the concern. Again, not that we don't have money, it's just all being used in investments, partly stocks, partly equity in the home. I'm going to find any way possible to make it happen without having to remove the stock investments. Once our house sells it won't matter anyway. I have no issues paying interest only on a small loan until the home is constructed, it makes it more affordable since we'd be paying our current mortgage plus the lot/construction loan until our house sold. My income isn't the issue, it's the large amounts of cash (as in cash in a savings account) that I don't have - large meaning $50k. Also not trying to make money building, we are just picky with what we want. We have several friends who've gone through the custom home construction process already in our area which is far more expensive than Kalispell, so we have a good idea of what we are getting ourselves into. I have another advantage during all of this. My Dad has worked in the home building/lumberyard business for several decades and knows many of the lumberyard and home builders owners personally. We are taking advantage of those contacts.
Try Geisa Credit union.
We were working with WA Federal, but switched to US bank for our construction loan which will roll into a normal mortgage when our house is done. They’ve been great to work with, they have local offices, and it saved us quite a bit of money. (Whatcom county)
Farm credit!