Construction Loan for infill Lot Vs New Subdivision
Cheree Kennedy (7a SE PA)
14 days ago
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13 days agoMark Bischak, Architect
13 days agoRelated Discussions
Construction Loan contract question - deposit required?
Comments (8)I have issues with the EXPLANATION your builder tried to give you regarding the 5% deposit he is asking you to pay to him. He says this provides the bank with extra security... HUH? How can your giving extra money to the builder possibly make the bank more secure???? Yes, banks want you to have skin in the game but I suspect that bank would much rather have that extra 5% of yours in a deposit account in their bank ready to pay out to builder once he has earned it than in builder's pocket before builder has even broken ground. And, it actually sounds like the 5% is going to have to come out of your loan amount rather than out of your pocket now. If so, what builder is actually asking for is a 5% draw from the bank before he ever does any work. NO WAY! The last thing banker's want is for builders to get any of bank's money BEFORE they earn it. Getting money upfront (before work is done) is how shyster builders operate. They are the ones who then disappear leaving you with a half-built house and not enough money left in the bank to finish it...which often forces the homeowner to walk away leaving bank owning the half-built home. If builder had said something like: "the 20% down is to purchase the land. You will then own it outright and I will give you the deed for it immediately. That means that, if you then decided you wanted to, you could walk away from me and go find someone else to build your house on the land. So I want an additional 5% deposit to ensure that you'll stay with me and let me build your house because otherwise I don't want to sell you the land." Well, that would have made sense and at least sounded honest. (That is, assuming the land without a house is actually worth that 20% and you could build the house you want for the remaining 80%.) But "pay me an additional 5% because it will give the bank more security" is, IMHO, pure flim-flam! And, if builder will attempt to flim-flam you at this point, he'll do the same thing repeatedly over-and-over again as the work progresses. Frankly, this is a red flag that should make you wonder if you even want to get into a contract with this guy at all. At the very least, ask your builder - in the presence of your banker - to explain to you EXACTLY how your putting more money into buider's pocket before he actually does any work for you is somehow going to make banker feel more secure. And then ask your banker if he agrees with builder's explanation....See MoreAdvice needed: rent, mortgage, construction loan,
Comments (7)Only you can decide what the right scenario is. Your gut will usually steer you in the proper direction. I can only tell you how free my husband and I feel right now without any loans on our property. No one can take it away from us if times get really sour. Naturally, you still have taxes, insurance, and upkeep, but building a reasonable home takes the pressure off of that. We look at our land and feel thrilled that it is truly ours. As long as someone has a loan on their home or land, they do not own it, the bank does. Try missing a payment or two if disaster strikes and see what happens. Disaster can be a major unexpected illness or accident, natural disaster in an area, or economy based. Was it a hassle to sell a house while living in it? For sure! I hated that process. (Fortunately, we sold in under a year). We decided the short term nuisance of selling while in the house was still better than owing a bank for more money. The interim of not being in my new home yet is difficult at times. I'm in a small place in the meantime. I'll admit, I'm spoiled and want it now. However, in the home scheme of things, it's only a short term inconvenience, and then I'll be through with construction and in my home. And I do have a decent roof over my head in the meantime. Also totally ours. As far as construction loans go, yes, they are given out in draws, but we had been locked into an interest rate that was good for the life of the construction loan, and grandfathered into the mortgage itself. However, the way the banks are now, that may no longer be the case. Keep in mind that a lot of banks will not let you be the owner/contractor, but it doesn't sound like that is the way you want to go anyway. Now the issue about equity loans. They are hard to come by these days, even with a perfect credit score. I have a friend who is vice president of a bank. She said that they have had many people borrow against a home they are currently in, and no longer wanted. Of coarse, they never tell the bank they no longer want the home. They say they want to make improvements, or whatever. With the real estate market what it is, it can take time to sell. So, they are buying another home with the equity money and letting the bank foreclose on the one that was no longer wanted. This has made getting home equity loans harder to get than hens teeth, and hurts the honest people. You may also find it very difficult to get the equity loan processed, funds dispersed, and a new home totally constructed ready to move in, within a year. Even with a reputable builder, homes are seldom done in the exact time frame we want. The banks are approving loans, setting closing dates, and then either pulling the plug for some lame excuse three days before closing, or re-setting closing dates over and over, due to "needing more papers filed" that come out of nowhere. Good luck in whatever decision you make. It's never an easy one, and I wish you the best....See MoreNew Construction HVAC Comfortmaker vs Trane
Comments (13)I'm not familiar with what is produced from the Manual J, what specific input are we looking for from the calc to review? I know it was done as its required in the building permit process here. I wasn't concerned about the BTU size, so I'm glad I asked. For Region 3 I had always understood it to be about 40 BTU per sqft for furnace so I figured it was ok. The house faces west and does have bigger windows on the west and east sides. The NG is a recent development (this was not known to the HVAC guy), would that change what you guys are looking at vs using LP / Heat pump combo? He did give me a price on the 2 stage furnace Trane XV-95 it was another $800 over the XT-95. A side note the HVAC guy made it sound like it was great that he actually got to talk with me as some builders like noted push HVAC to the side when its one of the most important items.... and they never get to actually talk with the homeowners. His overall recommendation to me was the XR-15 15 Seer Heat pump with Trane XV-95 based on LP. I know adding the heat-pump component is another $800 or so, perhaps with that removal I look at the better furnace. Based on the initial feedback I was starting to lean towards the XT-95 with a normal AC unit (XR14 or XR16)...See Morejumbo construction loan with new construction ADVICE needed!
Comments (19)My husband and I ran into a similar problem when we had our big addition/remodel. What my husband did was contacted both the bank and the appraisal company and showed them our building plans and asked that they base the appraisal on the prospective build out. The bank worked with us. The residential lending officers actually visited our home on three separate occasions to ensure that we were in fact upgrading the home to the level we proposed we would, understandably they needed to ensure their money was going where it should be. So about midway through the project they increased our construction loan by 25,000, and 3/4 into the project they gave us the final 40,000 they agreed to lend us. This was still about 25,000 shy of our desired amount. In addition to our discussion with the bank, we sat with the contractor and asked where we could cut some corners. He offered us the opportunity to do some “homework” throughout the project which included cleaning up the work site at the end of the day ourselves and preparing the area for the following day, drilling holes in the framing to save a ton of time that we would normally pay the electricians 125 per hour to do, and the biggest savings was painting the house ourselves. You may not have the time or desire to do this much hands on but I gotta day not only did we save enough to complete the project, but we came in under budget enough to furnish a few of the rooms. Best of Luck!...See MoreWestCoast Hopeful
13 days agolittlebug Zone 5 Missouri
13 days agoWestCoast Hopeful
13 days agoCheree Kennedy (7a SE PA)
12 days agoCheree Kennedy (7a SE PA)
12 days agoDavid Cary
12 days agoCheree Kennedy (7a SE PA)
11 days agoCheree Kennedy (7a SE PA)
11 days ago
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