New user! Beginning Steps - Survey, Loans, Design

TheCatsMeowthJune 8, 2012

I recently purchased a .63 acre neighborhood corner lot on a dead end in my current neighborhood (where I rent) to build my first house on. I plan on paying off the cost of the land before building to be able to use the land equity towards a loan since I won't have house equity like many other builders. The land loan is a 5 year loan that I intended to pay off in 2, but with a recent pay increase (and a stricter budget that I wasn't initially sure I could stick to) it looks like I'll be able to pay off the loan in 12-18 months.

After looking through hundreds of floor plans, I've decided to design my own house (and have started) and will eventually post them here for criticism.

My biggest concern is determining how to limit myself in size. How do I determine how much I would qualify for without actually applying for a loan? I plan on saving for possibly another year or more after the land is payed up for a significant down payment, but determining that amount is beyond me as well. I also have parents and another family member willing to help on the loan since I don't have a house for equity.

I plan on designing as much of the house myself before taking the plans to an architect for professional blueprints. At what point do I survey the property? It has a slight slope and because of the length I believe I can have a walk out basement in the with the rest of the basment being more level near the front.

Thanks for the help!

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I'm no expert and you'll hear better ideas from others, but as I'm just a little further in the same process as you:

First, figure out what you can comfortably AFFORD, rather than qualify for. The two may coincide, but as recent lessons have taught us, some lenders are willing to give considerably greater loans than we can afford, particularly with co-signers. Around here, and in my mind, a good rule of thumb for being affordable and qualifying for a mortgage is the 28-36 mortgage rule, meaning no more than 28% of a household's gross income can be used on housing costs (including mortgage payments, property taxes and insurances), and total the debt payments cannot exceed 36%.

Once you have an idea on what you can afford, I would contact local contractors who build spec houses and see what they build certain size houses for. Here, for example, I can get a 2,200 sq ft 2 story spec house from a dozen different contractors for $175k--while a custom plan could certainly cost more for the same size, at least this can give you a ballpark of what materials and labor would run in your area. That way you don't set your heart on a house that is twice what you can afford because you use online estimate calculators or the like which cannot be trusted.

Just my thoughts.

    Bookmark   June 8, 2012 at 10:25AM
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Sophie Wheeler

Find out what current homes in the neighborhood are selling for, subtract out your land cost, and then multiply that by 1.5 to 2 to get close to the price of a custom build of the same size.

    Bookmark   June 8, 2012 at 7:56PM
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The house should suit the land, so doing the survey earlier in the process is very helpful. You need know the actual shape of the land and any applicable setbacks in order to design a house that will fit on the property. And knowing the elevations will allow you to determine whether there is enough slope for the walkout basement or whether having one will involve a lot of additional site work.

    Bookmark   June 8, 2012 at 8:54PM
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Thanks for all the advice! I'm going to try and estimate on the higher side to be prepared, so I've taken the higher priced houses, multiplied by 1.5, then subtracted land costs for a house cost of $330.

While I don't think I'm capable of being a complete GC, I will be doing as much of the labor as I can, hoping to save about 10% of the cost of the house (although more would be ideal of course).

If I went by the 28-36 rule, I don't know if I'd qualify for much even with cosigners. My income doesn't suggest that I'd be able to afford a normal morgage, however, because of my living style and debt free situation (except for the land at the moment), I've been able to almost triple my payments, something the bank certainly did not expect. I'm hoping that the early payment of the land loan will help in my construction loan, showing what I'm actually capable of paying rather than what the 'average' is for my income.

    Bookmark   June 9, 2012 at 6:36AM
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