Since the last post I have talked to the bank and we can not close on the loan until they get the okay from the health department stating the well and septic are going to work. This is kind of funny since the health department would not look at the property until we proved we owned the land. I don't know what we would have done if we were not buying the property from my in-laws and were able to do the quick deed.
On Monday I went to the recorders office and got a copy of the deed and took it down to the health department, also made copies to hang on to in case anyone else needs them. I then called the builder and let him know that I had taken a copy of the deed down to the health department. He was going to go down and see if he could speed up the process. Originally they had said it would take 5 to 7 days.
Yesterday the builder stopped by and got a copy of the deed to take to try to get the building permits started.
One good thing coming out of this is that I talked to my father-in-law about not paying for the land until the fist construction draw and he is okay with this. Hopefully that will save us a month's interest payment. I will have to run it by our banker to make sure this can happen, but I don't see why it wouldn't since the deed is already in our name.
Wednesday, February 24, 2010
Friday, February 19, 2010
Quick Claim Deed
Yesterday afternoon my builder called and wanted me to call the health department about getting a permit to make sure the septic and well were going to be sufficient. I called the health department they need a paper that states the property is in deed ours. Uh oh, the property is not technically ours at this time. It won't be ours until we close on the loan.
I called my banker to see what was going on with the loan. She informed me that it had been sent on to be processed. She looked it up and nothing had been done with it yet. She was going to send an email to see if she could not speed up the process.
I called my builder to let them know what was going on. He informed me that we should just do a quick deed to put the property in our name. I call the title company to find out what is involved in this process. Turns out it is fairly simple, there is a form that my in-laws need to fill out and sign and we need to sign and it has to then be notarized. All of this and a $125.00 fee. Which I don't consider to be that bad. They said we will just pay for it at the closing and the original fee for transferring the deed was going to be $75.00. So it really is only costing $50.00. We got the form yesterday afternoon and my wife and I have signed it. My in-laws are going to take it back to the title company and sign and have it notarized.
The builder also told us that the first color that he needs to know is for the windows. I think that we have this picked out, but will try to make sure this weekend.
I called my banker to see what was going on with the loan. She informed me that it had been sent on to be processed. She looked it up and nothing had been done with it yet. She was going to send an email to see if she could not speed up the process.
I called my builder to let them know what was going on. He informed me that we should just do a quick deed to put the property in our name. I call the title company to find out what is involved in this process. Turns out it is fairly simple, there is a form that my in-laws need to fill out and sign and we need to sign and it has to then be notarized. All of this and a $125.00 fee. Which I don't consider to be that bad. They said we will just pay for it at the closing and the original fee for transferring the deed was going to be $75.00. So it really is only costing $50.00. We got the form yesterday afternoon and my wife and I have signed it. My in-laws are going to take it back to the title company and sign and have it notarized.
The builder also told us that the first color that he needs to know is for the windows. I think that we have this picked out, but will try to make sure this weekend.
Wednesday, February 17, 2010
New Contract
Yesterday I faxed copy of our new contract to the bank. It has the corrected amount on it so it matches what the loan value is. As it turned out the banker did find the bank statements that I had faxed to her, so I did not have to refax those.
Today I talked to our accountant about the federal tax credit for existing home owners buying a new house. As of today we should qualify for that. In the updated tax codes it stated that if you have owned your current house for 5 years and will have a binding contract by April 30th 2010 then you can claim the tax credit. That is great news, we should get $6500.00 back from the government next year. Our accountant did tell us that this could be subject to change though. So right now I am just keeping my fingers crossed.
Today I talked to our accountant about the federal tax credit for existing home owners buying a new house. As of today we should qualify for that. In the updated tax codes it stated that if you have owned your current house for 5 years and will have a binding contract by April 30th 2010 then you can claim the tax credit. That is great news, we should get $6500.00 back from the government next year. Our accountant did tell us that this could be subject to change though. So right now I am just keeping my fingers crossed.
Friday, February 12, 2010
Appraisal came back
Yesterday along with the samples the builder dropped off new copies of the contract and a copy of the plot plan. The bank needed a copy of the plot plan and a new copy of the contract. Something about the amounts being off by $20.00. So today I called the banker to let her know I had the plot plan and new copies of the contract. She had me drive to the local bank office and drop off the plot plan as it is too large to fax. The rest of the stuff I will fax to her on Tuesday. Monday is a holiday.
Appraisal came back in today. Not as high as I had hoped. The land appraised for what we wanted it to which is great because it will have to make up for what the house is lacking in the appraisal. Again the advantage of dealing with nice in-laws that want you to live next to them. Now for the bad the house appraised for about 6 percent less than what we are paying for it. Not a great way to start out your loan. Hopefully the housing market will turn around someday. I am not too worried about it since this will hopefully be the house we live in for the rest of our lives. Also, it should still work out where we don't have to pay mortgage insurance because of the equity in the land.
Something to keep in mind when getting ready to build is that you can save money building by leaving spaces unfinished, but it severely hurts your appraisal cost. The houses that the appraiser used as comps were all relative to the finished space on our house 0f 2100 square feet. Even though we have 1600 square feet of unfinished basement and another 650 square feet of bonus room. I am just glad the land appraised high enough or this would have been a deal breaker.
Also the bank seems to have lost my bank statements that I sent them showing the deposit of funds from selling our house. I guess I will be re-faxing those on Tuesday as well.
Appraisal came back in today. Not as high as I had hoped. The land appraised for what we wanted it to which is great because it will have to make up for what the house is lacking in the appraisal. Again the advantage of dealing with nice in-laws that want you to live next to them. Now for the bad the house appraised for about 6 percent less than what we are paying for it. Not a great way to start out your loan. Hopefully the housing market will turn around someday. I am not too worried about it since this will hopefully be the house we live in for the rest of our lives. Also, it should still work out where we don't have to pay mortgage insurance because of the equity in the land.
Something to keep in mind when getting ready to build is that you can save money building by leaving spaces unfinished, but it severely hurts your appraisal cost. The houses that the appraiser used as comps were all relative to the finished space on our house 0f 2100 square feet. Even though we have 1600 square feet of unfinished basement and another 650 square feet of bonus room. I am just glad the land appraised high enough or this would have been a deal breaker.
Also the bank seems to have lost my bank statements that I sent them showing the deposit of funds from selling our house. I guess I will be re-faxing those on Tuesday as well.
Thursday, February 11, 2010
Lots of samples
The builder stopped by this afternoon to drop off the samples that he said he would. We now have samples for the gutters, roof shingles, windows, window colors, and paint colors for interior and exterior.
The beginning...well almost the beginning.
As of today my wife, two small children, and I are in the midst of trying to build a new house. The intent of the this blog is to let other first time or anyone possibly thinking of building a house know everything that it entails. I realize that everyone's situation is different but I still think that this should prove to be useful.
First a little background information on our situation. The house that we are looking at building will be on a 5 acre lot that my in-laws currently own and are willing to sell to us. We are looking at building the house that we intend to live in for the rest of our lives. My in-laws house sits adjacent to the lot that we are buying and sister in law's house sits on a lot in front of the lot we are buying. Almost an in-laws family compound if you can envision it. For many people this would maybe a bad thing even a deal breaker, but I have been truly blessed with great in laws. I don't see living next to them as being a problem.
The home that we are currently living in is the house that I grew up in. I was fortunate enough that when I graduated from college my parents happen to be moving into a different house. When they did that I moved in and started renting the house. Once married my wife and I decided to purchase the home from my parents. Buying property from family members does have benefits. In our case my parents were able to gift us equity in the house eliminating the need for us to have to come up with a down payment. The way this works is that we had an agreed purchase price; the purchase price was lower than the appraised value, so the difference between the appraised value and the purchase price was what they gifted to us. In this case that worked out to enough for us to avoid having to come up with a down payment or pay mortgage insurance.
At the end of last year we were approached by the local government wanting to buy our house. After some deep deliberation my wife and I decided that this would be a good way to get out of our house if we were ever going to do it. This was not an easy decision because the town's reasoning for wanting to buy the property is to tear it down and put a parking lot in its spot. My wife and I had put a lot of labor into making the house look as good as possible and now it was going to get bulldozed over. So is life I guess. When dealing with the town I felt that they were pretty fair with us. They paid to have two appraisals done and agreed to pay us the average of the two. Now I had a pretty good idea of what our house was worth because we had just refinanced a little over a year ago. Since the refinance we had painted the exterior of the house, built a new deck, repainted our fence that goes around the entire and house, and completed a lot of landscaping. I was hoping to get what the house had appraised for a little over a year ago plus the amount I had spent on the improvements.
When trying to value your house, you can almost do it yourself now. If you get online and look at houses that are for sale in your area and compare them to your own you can get a pretty good idea. This seems to be what the appraisers do as well. The difference is that they are looking at houses that have already sold versus houses that are currently for sale. If you are an appraiser I know that it is much more involved so don't take offense. However as a home owner when doing this you have to be honest with yourself and get caught up in the fact that you think what you have is nicer than everyone else. After evaluating other properties that were for sale in our area I began to worry about the appraisals that were going to be done. I started thinking that selling our house may not even be a viable option. The housing market is really, really bad right now, at least for getting top dollar for your existing house. The appraisers came and did their thing and sure enough the appraisal was a little lower than we wanted. Basically the value of the house had gone down about 5 percent since the last appraisal a little over a year ago. So basically we lost the money that we had invested in the past year in the improvements that we made.
There were a couple good things about dealing with the town. One was that we did not have any Realtor fees in selling the house and we did not have to pay any closing costs. We looked at this and thought that this basically put us back up to getting what we thought the house was worth. Also the town has given us salvage rights to the house. This allows us to take anything out of the house that we want. Lastly, we get to stay in our house free until mid April. Which we figured would be close to when our new house was ready. Oh how wrong we were.
December 29, 2009
Today was a big day. We closed on our existing house that the town purchased. We are now officially homeless, well not really we are still living there. We have until the tenth of April before we have to be out. I am sure my wife will be ready to start packing tonight.
January 5, 2010
Picked up house plans from designer. Over the past month my wife and I had picked out a house from one of the millions of plans available on the internet and taken them to a local designer to have them drawn. We had dropped them off 2 weeks prior to now. This is a good way of doing this. It saved us at least $500.00 over ordering them online and is easier to make changes if we need to. Also it gives business to someone local which I am a big fan of.
January 8, 2010
We met with our builder. Over the last month we had decided on a builder and talked with him a couple of times about various things. He is the one that let us know about the local designer to draw up the plans. We have known our builder for many years and are comfortable with him. His wife worked with my father in law and he built my sister in law's house. Tonight we met with the builder to go over materials that we wanted to use so he would know what to bid. We are going with real hardwood floors for the majority of the house. Carpet in the bedrooms. Custom oak cabinets and solid surface counter tops. Exterior of the house will be Hardie Plank and cedar. Basement will be unfinished and bonus room will be unfinished. I will be installing the hardwood floors and we will be doing all of the painting. Here is picture of what we are hoping our house will look like.
January 11, 2010
We have made changes to the plans and sent them back to the designer so she can finalize them. Mostly minor changes. She had eliminated a half bath in order to make stairs for bonus room work. We added the half bath back in. We also made master bedroom slightly larger and changed the direction a couple of doors opened.
January 15, 2010
Final plans were done and sent to builder. I got a copy of the plans and gave them to the banker that we had decided to go with. Back before we had sold our existing home I had made phone calls to some bankers to check on new construction loans and rates. I also went ahead and got pre-approved. That way we would know what our budget was.
Now this is part of what I think is wrong with our banking and housing market. I know, my wife knows, and the bank should know that we cannot afford the payments on a mortgage for what we were pre-approved for. Perhaps if we did not eat, drive anywhere, or pay for any childcare we could make the payment. What I did and what I suggest others do, is to tell your banker what sort of payment you are comfortable making each month and let them tell you what that comes to in a 30 year fixed mortgage at current market rates. Also be sure to have them estimate in the taxes and home insurance to have a more accurate picture. I do not recommend any other loan type other than a fixed year mortgage.
The banker has given me a list of everything that she will need in order to get the loan processing underway. These include tax returns last two years, last two paycheck stubs, HUD settlement statement from selling our home, signed contract with builder, house plans and specs, and a purchase agreement for the land we are building on.
January 28, 2010
Today we got the bid back from the builder. Everything was about what I had figured. The house we are going to build is a 2100 sq ft craftsman style ranch with 1600 sq ft poured concrete unfinished basement, 650 square feet unfinished bonus room, and two car attached garage. When talking to the builder originally he had told us approximately what it would cost a square foot. When talking about a price per square foot you need to be careful. This does not include things like basements, bonus rooms, or garages. Our builder did let us know this ahead and gave different prices for the square footage of the aforementioned portions of the house.
Armed with this information I was able to get a pretty good idea of what we would have to finance and what we would have to come up with to put down.
There were a couple of unknown variables one was how much we would save by doing some of the work ourselves. As it turned out doing the painting will save us about $20,000.00. Now this has already been taken out of the cost of the house. It is not going to be subtracted from the total above. On the floors I am not sure what I am saving. I have a feeling that the only difference is that I will be able to have real hardwood floors for about the cost I would have paid if I had laminate installed. To me this is worth the labor of installing them ourselves. The second variable was how much we were going to have to come up with to put down on the new loan. In today's market our banker told us we would have to come up with at least 15 percent. The days of being able to buy a house or build a house with practically nothing down has come to an end. That is probably for the best.
Now the price we got from our builder does not include the land. So we have to be sure to add that in when we look to see how much we will be financing and what our payments will be. The good thing is that buying the property from our in-laws is allowing us to once again capitalize on a gift of equity. This will add about 5 percent equity into the equation and get us up to 20 percent down. This is great because it is going to save us from paying any mortgage insurance.
Another thing to keep in mind is that closing costs are not figured into the amount that you are putting down either. So don't stretch your cash output too far or you won't be able to afford your closing costs. Our closing cost is estimated at $3,000.00. I have specified with the bank on a certain title company that I wanted to do the closing. This is a big thing to me as I work in small family owned business. I feel that it is important to do business locally and to support your community. You can use any title company that you wish, but if you do not happen to know a title company the bank will set one up for you.
January 29, 2010
We are now one month into the process. Today I faxed gift letters, building specs, contract, and everything else the bank needed to them. Our banker let me know that it was probably going to be a 3 week process of getting the loan approved. Now I don't know what I was thinking, but it certainly was not that this was going to take 3 weeks. This is going to put us nearly into March before we even close on the loan. Our being able to stay in our house until April is not looking like near enough time.
My grandparents happen to have leased a home in Alabama through July. So I have talked to my mom about the possibility of us moving into their house until our house is finished. This might work out well because they have a large garage and barn that we could store some of our stuff in. The drawback will be the commute. Right now my wife and I both drive about 10 minutes to work. That will change to at least 1 hour for both of us.
February 2, 2010
Builder stopped by work today. He wanted to pick up a signed copy of the contract he had given us. He also wanted to know whether I wanted him to proceed with getting the plot plan going on the land that we are hoping to build on. I am not exactly sure of what the plot plan is, but I think it involves having the surveyors come out and stake where everything is going to be. This includes house, drive way, septic field, and secondary septic field. All I know for sure is that it is around $1200.00 and going to take about 2 weeks. He wants to make we will pay him if this whole deal falls through. I told him to go ahead and proceed. My hope is that his paper work and the bank's paper work will all be done at about the same time.
I asked him about the cost difference of getting the Hardie Plank siding by color rather than us painting it. He said he will find out and get us color samples as well. We have started second guessing ourselves about painting the exterior of the house. It seemed like a good idea at the start. I have a feeling that the cost will force us to go ahead and paint it ourselves. We got the idea of getting the siding by color from going to the local home show. If this happens to be going on during the time you are looking at building it may not be a bad idea to go to. Overall I did not feel like I got a lot out of it, but it made the wife happy which counts for something. Mostly you see what you wish you could have but know you can't afford. It does look like it would be great for contractors to attend to get ideas that they could use when building houses or doing renovations for their clients though.
I also emailed my banker to make sure that she had received everything that I faxed her on Friday. She had.
When I got home we had a packet from the bank in the mail. The packet contained what appeared to be a loan application that had all of our information in it. It contained some information that I did not feel was completely accurate at this time. It did not show that our existing home had been paid off, and it had the wrong address for the land that we are hoping to build on.
February 3, 2010
I called the banker and asked about incorrect information on the loan application or what I think is the loan application. I guess it is actually the loan disclosure packet. Anyway, the banker assured me that the information is correct in her file and that is all that matters. The banker did tell me that if I wanted to cross out the existing home loan and write paid off in I could. I am crossing it out. I am faxing the document back to the bank. I hope she is right and the incorrect information does not matter.
The bank has let me know that the appraiser was going to be out to look at the property that we are hoping to build on. This is kind of exciting, starting to feel like something is actually happening.
Got an interesting phone call from father in law this afternoon. Since he lives next to the property and my sister in law lives in front of the property, he was over to wait for my nephew to get off the school bus and saw a woman driving slowly and looking around. This went on for a while until his curiosity finally won out and he went over to see what the lady was looking for. As it turned out it was the appraiser. She could not find the property and had been driving around for most of the afternoon. Imagine she had the same incorrect information that I had been given. This is kind of what I was worried about when I saw it. The appraiser had called our builder and he had given her the correct address and told her he would put a sign out. He had not had time to put the sign out so luckily she ran into my father in-law and he was able to show her the property. As it turned out, I am very glad that she ran into him, because not only was the address wrong, she was under the impression we only had .25 acre lot instead of 5 acres. He also got to put a plug in for offers that he had received on the land prior to deciding to sell it to us at a discounted price. I hope this holds some value with the appraiser.
February 4, 2010
I met with our builder this morning at the building site along with the surveyor to start the plot plan. We staked out where we wanted the house. The septic field and secondary septic field had already been determined when my in laws had sub divided the property. So all we had left to mark was where the drive had to run. It is amazing that we are going to build on 5 acres and it doesn't feel like it will all fit hardly. It is going to be pretty close for the drive to fit between the primary septic field and the secondary septic field.
I don't even know what a secondary septic field is, but it seems like a big waste of ground to me. All I know is that we can not build anything on it or have the drive go over it. The surveyor was telling me that it now takes and 1.5 acres now to even build a house on it. After seeing everything staked out I believe it.
February 5, 2010
Builder called and told me that the drive will not clear the secondary septic field. Choices are to flip the layout of our house so the garage faces the other way, move our house location closer to the property line and closer to woods all but eliminating our back yard, or move the secondary septic field costing $600.00. I have opted for moving the secondary septic field. When you are spending all of this money what is another $600.00 right?
February 7, 2010
Sent an email to the cabinet maker to get a quote from him on our cabinets. I don't think that I have mentioned that I have a few subcontractors that I have specified that I wanted to use. The builder had quoted his people now I have to make sure the subcontractors that I want to use can match those prices. I feel it is important to give as much business to local folks and friends if possible.
I had given a copy our plans to my friend the cabinet maker a couple of weeks ago and expected to hear back from him by now. As it turned out he was having trouble getting prices back from his suppliers. He assured us he would have a firm price for us in a couple of days.
February 9, 2010
Cabinet maker stopped by work today and gave me a bid. It came in slightly less than what the builder had quoted, so that is great. Also being that it is a friend of mine he said he would help install them for that price. This is great news all round, I feel that I am going to get a better product and save a little money on top of that. Basically our builder is letting us have any of the money that we save using our own subcontractors.
February 10, 2010
Cabinet maker emailed me terms and conditions for him building cabinets. Basically a contract. Once everything with the bank is done and the house is started we will get this signed and back to him.
Called the banker to find out what was going on with the loan. The appraiser is having trouble coming up with new construction comps in our area. I don't know what to make of this. I have told my wife that if this all falls through I will consider it divine intervention saying we should not be spending this much. For those that don't know how this works with new construction, you have to give your plans and specs to the bank. Then they hire an appraiser and they go out and envision your house on the lot that you are buying. The appraiser then tells the bank what they think the house will be worth once it is completed. If the amount is as much or more than the contracted price you are in good shape. If it is less then you have trouble.
The builder called to say he was going to come and drop off a bunch color samples for products that we will be using in the construction of our home tomorrow. He is supposed to have samples of the pre-painted Hardie Plank siding. Again, I have the feeling that cost is going to dictate that we paint the siding ourselves.
First a little background information on our situation. The house that we are looking at building will be on a 5 acre lot that my in-laws currently own and are willing to sell to us. We are looking at building the house that we intend to live in for the rest of our lives. My in-laws house sits adjacent to the lot that we are buying and sister in law's house sits on a lot in front of the lot we are buying. Almost an in-laws family compound if you can envision it. For many people this would maybe a bad thing even a deal breaker, but I have been truly blessed with great in laws. I don't see living next to them as being a problem.
The home that we are currently living in is the house that I grew up in. I was fortunate enough that when I graduated from college my parents happen to be moving into a different house. When they did that I moved in and started renting the house. Once married my wife and I decided to purchase the home from my parents. Buying property from family members does have benefits. In our case my parents were able to gift us equity in the house eliminating the need for us to have to come up with a down payment. The way this works is that we had an agreed purchase price; the purchase price was lower than the appraised value, so the difference between the appraised value and the purchase price was what they gifted to us. In this case that worked out to enough for us to avoid having to come up with a down payment or pay mortgage insurance.
At the end of last year we were approached by the local government wanting to buy our house. After some deep deliberation my wife and I decided that this would be a good way to get out of our house if we were ever going to do it. This was not an easy decision because the town's reasoning for wanting to buy the property is to tear it down and put a parking lot in its spot. My wife and I had put a lot of labor into making the house look as good as possible and now it was going to get bulldozed over. So is life I guess. When dealing with the town I felt that they were pretty fair with us. They paid to have two appraisals done and agreed to pay us the average of the two. Now I had a pretty good idea of what our house was worth because we had just refinanced a little over a year ago. Since the refinance we had painted the exterior of the house, built a new deck, repainted our fence that goes around the entire and house, and completed a lot of landscaping. I was hoping to get what the house had appraised for a little over a year ago plus the amount I had spent on the improvements.
When trying to value your house, you can almost do it yourself now. If you get online and look at houses that are for sale in your area and compare them to your own you can get a pretty good idea. This seems to be what the appraisers do as well. The difference is that they are looking at houses that have already sold versus houses that are currently for sale. If you are an appraiser I know that it is much more involved so don't take offense. However as a home owner when doing this you have to be honest with yourself and get caught up in the fact that you think what you have is nicer than everyone else. After evaluating other properties that were for sale in our area I began to worry about the appraisals that were going to be done. I started thinking that selling our house may not even be a viable option. The housing market is really, really bad right now, at least for getting top dollar for your existing house. The appraisers came and did their thing and sure enough the appraisal was a little lower than we wanted. Basically the value of the house had gone down about 5 percent since the last appraisal a little over a year ago. So basically we lost the money that we had invested in the past year in the improvements that we made.
There were a couple good things about dealing with the town. One was that we did not have any Realtor fees in selling the house and we did not have to pay any closing costs. We looked at this and thought that this basically put us back up to getting what we thought the house was worth. Also the town has given us salvage rights to the house. This allows us to take anything out of the house that we want. Lastly, we get to stay in our house free until mid April. Which we figured would be close to when our new house was ready. Oh how wrong we were.
December 29, 2009
Today was a big day. We closed on our existing house that the town purchased. We are now officially homeless, well not really we are still living there. We have until the tenth of April before we have to be out. I am sure my wife will be ready to start packing tonight.
January 5, 2010
Picked up house plans from designer. Over the past month my wife and I had picked out a house from one of the millions of plans available on the internet and taken them to a local designer to have them drawn. We had dropped them off 2 weeks prior to now. This is a good way of doing this. It saved us at least $500.00 over ordering them online and is easier to make changes if we need to. Also it gives business to someone local which I am a big fan of.
January 8, 2010
We met with our builder. Over the last month we had decided on a builder and talked with him a couple of times about various things. He is the one that let us know about the local designer to draw up the plans. We have known our builder for many years and are comfortable with him. His wife worked with my father in law and he built my sister in law's house. Tonight we met with the builder to go over materials that we wanted to use so he would know what to bid. We are going with real hardwood floors for the majority of the house. Carpet in the bedrooms. Custom oak cabinets and solid surface counter tops. Exterior of the house will be Hardie Plank and cedar. Basement will be unfinished and bonus room will be unfinished. I will be installing the hardwood floors and we will be doing all of the painting. Here is picture of what we are hoping our house will look like.
January 11, 2010
We have made changes to the plans and sent them back to the designer so she can finalize them. Mostly minor changes. She had eliminated a half bath in order to make stairs for bonus room work. We added the half bath back in. We also made master bedroom slightly larger and changed the direction a couple of doors opened.
January 15, 2010
Final plans were done and sent to builder. I got a copy of the plans and gave them to the banker that we had decided to go with. Back before we had sold our existing home I had made phone calls to some bankers to check on new construction loans and rates. I also went ahead and got pre-approved. That way we would know what our budget was.
Now this is part of what I think is wrong with our banking and housing market. I know, my wife knows, and the bank should know that we cannot afford the payments on a mortgage for what we were pre-approved for. Perhaps if we did not eat, drive anywhere, or pay for any childcare we could make the payment. What I did and what I suggest others do, is to tell your banker what sort of payment you are comfortable making each month and let them tell you what that comes to in a 30 year fixed mortgage at current market rates. Also be sure to have them estimate in the taxes and home insurance to have a more accurate picture. I do not recommend any other loan type other than a fixed year mortgage.
The banker has given me a list of everything that she will need in order to get the loan processing underway. These include tax returns last two years, last two paycheck stubs, HUD settlement statement from selling our home, signed contract with builder, house plans and specs, and a purchase agreement for the land we are building on.
January 28, 2010
Today we got the bid back from the builder. Everything was about what I had figured. The house we are going to build is a 2100 sq ft craftsman style ranch with 1600 sq ft poured concrete unfinished basement, 650 square feet unfinished bonus room, and two car attached garage. When talking to the builder originally he had told us approximately what it would cost a square foot. When talking about a price per square foot you need to be careful. This does not include things like basements, bonus rooms, or garages. Our builder did let us know this ahead and gave different prices for the square footage of the aforementioned portions of the house.
Armed with this information I was able to get a pretty good idea of what we would have to finance and what we would have to come up with to put down.
There were a couple of unknown variables one was how much we would save by doing some of the work ourselves. As it turned out doing the painting will save us about $20,000.00. Now this has already been taken out of the cost of the house. It is not going to be subtracted from the total above. On the floors I am not sure what I am saving. I have a feeling that the only difference is that I will be able to have real hardwood floors for about the cost I would have paid if I had laminate installed. To me this is worth the labor of installing them ourselves. The second variable was how much we were going to have to come up with to put down on the new loan. In today's market our banker told us we would have to come up with at least 15 percent. The days of being able to buy a house or build a house with practically nothing down has come to an end. That is probably for the best.
Now the price we got from our builder does not include the land. So we have to be sure to add that in when we look to see how much we will be financing and what our payments will be. The good thing is that buying the property from our in-laws is allowing us to once again capitalize on a gift of equity. This will add about 5 percent equity into the equation and get us up to 20 percent down. This is great because it is going to save us from paying any mortgage insurance.
Another thing to keep in mind is that closing costs are not figured into the amount that you are putting down either. So don't stretch your cash output too far or you won't be able to afford your closing costs. Our closing cost is estimated at $3,000.00. I have specified with the bank on a certain title company that I wanted to do the closing. This is a big thing to me as I work in small family owned business. I feel that it is important to do business locally and to support your community. You can use any title company that you wish, but if you do not happen to know a title company the bank will set one up for you.
January 29, 2010
We are now one month into the process. Today I faxed gift letters, building specs, contract, and everything else the bank needed to them. Our banker let me know that it was probably going to be a 3 week process of getting the loan approved. Now I don't know what I was thinking, but it certainly was not that this was going to take 3 weeks. This is going to put us nearly into March before we even close on the loan. Our being able to stay in our house until April is not looking like near enough time.
My grandparents happen to have leased a home in Alabama through July. So I have talked to my mom about the possibility of us moving into their house until our house is finished. This might work out well because they have a large garage and barn that we could store some of our stuff in. The drawback will be the commute. Right now my wife and I both drive about 10 minutes to work. That will change to at least 1 hour for both of us.
February 2, 2010
Builder stopped by work today. He wanted to pick up a signed copy of the contract he had given us. He also wanted to know whether I wanted him to proceed with getting the plot plan going on the land that we are hoping to build on. I am not exactly sure of what the plot plan is, but I think it involves having the surveyors come out and stake where everything is going to be. This includes house, drive way, septic field, and secondary septic field. All I know for sure is that it is around $1200.00 and going to take about 2 weeks. He wants to make we will pay him if this whole deal falls through. I told him to go ahead and proceed. My hope is that his paper work and the bank's paper work will all be done at about the same time.
I asked him about the cost difference of getting the Hardie Plank siding by color rather than us painting it. He said he will find out and get us color samples as well. We have started second guessing ourselves about painting the exterior of the house. It seemed like a good idea at the start. I have a feeling that the cost will force us to go ahead and paint it ourselves. We got the idea of getting the siding by color from going to the local home show. If this happens to be going on during the time you are looking at building it may not be a bad idea to go to. Overall I did not feel like I got a lot out of it, but it made the wife happy which counts for something. Mostly you see what you wish you could have but know you can't afford. It does look like it would be great for contractors to attend to get ideas that they could use when building houses or doing renovations for their clients though.
I also emailed my banker to make sure that she had received everything that I faxed her on Friday. She had.
When I got home we had a packet from the bank in the mail. The packet contained what appeared to be a loan application that had all of our information in it. It contained some information that I did not feel was completely accurate at this time. It did not show that our existing home had been paid off, and it had the wrong address for the land that we are hoping to build on.
February 3, 2010
I called the banker and asked about incorrect information on the loan application or what I think is the loan application. I guess it is actually the loan disclosure packet. Anyway, the banker assured me that the information is correct in her file and that is all that matters. The banker did tell me that if I wanted to cross out the existing home loan and write paid off in I could. I am crossing it out. I am faxing the document back to the bank. I hope she is right and the incorrect information does not matter.
The bank has let me know that the appraiser was going to be out to look at the property that we are hoping to build on. This is kind of exciting, starting to feel like something is actually happening.
Got an interesting phone call from father in law this afternoon. Since he lives next to the property and my sister in law lives in front of the property, he was over to wait for my nephew to get off the school bus and saw a woman driving slowly and looking around. This went on for a while until his curiosity finally won out and he went over to see what the lady was looking for. As it turned out it was the appraiser. She could not find the property and had been driving around for most of the afternoon. Imagine she had the same incorrect information that I had been given. This is kind of what I was worried about when I saw it. The appraiser had called our builder and he had given her the correct address and told her he would put a sign out. He had not had time to put the sign out so luckily she ran into my father in-law and he was able to show her the property. As it turned out, I am very glad that she ran into him, because not only was the address wrong, she was under the impression we only had .25 acre lot instead of 5 acres. He also got to put a plug in for offers that he had received on the land prior to deciding to sell it to us at a discounted price. I hope this holds some value with the appraiser.
February 4, 2010
I met with our builder this morning at the building site along with the surveyor to start the plot plan. We staked out where we wanted the house. The septic field and secondary septic field had already been determined when my in laws had sub divided the property. So all we had left to mark was where the drive had to run. It is amazing that we are going to build on 5 acres and it doesn't feel like it will all fit hardly. It is going to be pretty close for the drive to fit between the primary septic field and the secondary septic field.
I don't even know what a secondary septic field is, but it seems like a big waste of ground to me. All I know is that we can not build anything on it or have the drive go over it. The surveyor was telling me that it now takes and 1.5 acres now to even build a house on it. After seeing everything staked out I believe it.
February 5, 2010
Builder called and told me that the drive will not clear the secondary septic field. Choices are to flip the layout of our house so the garage faces the other way, move our house location closer to the property line and closer to woods all but eliminating our back yard, or move the secondary septic field costing $600.00. I have opted for moving the secondary septic field. When you are spending all of this money what is another $600.00 right?
February 7, 2010
Sent an email to the cabinet maker to get a quote from him on our cabinets. I don't think that I have mentioned that I have a few subcontractors that I have specified that I wanted to use. The builder had quoted his people now I have to make sure the subcontractors that I want to use can match those prices. I feel it is important to give as much business to local folks and friends if possible.
I had given a copy our plans to my friend the cabinet maker a couple of weeks ago and expected to hear back from him by now. As it turned out he was having trouble getting prices back from his suppliers. He assured us he would have a firm price for us in a couple of days.
February 9, 2010
Cabinet maker stopped by work today and gave me a bid. It came in slightly less than what the builder had quoted, so that is great. Also being that it is a friend of mine he said he would help install them for that price. This is great news all round, I feel that I am going to get a better product and save a little money on top of that. Basically our builder is letting us have any of the money that we save using our own subcontractors.
February 10, 2010
Cabinet maker emailed me terms and conditions for him building cabinets. Basically a contract. Once everything with the bank is done and the house is started we will get this signed and back to him.
Called the banker to find out what was going on with the loan. The appraiser is having trouble coming up with new construction comps in our area. I don't know what to make of this. I have told my wife that if this all falls through I will consider it divine intervention saying we should not be spending this much. For those that don't know how this works with new construction, you have to give your plans and specs to the bank. Then they hire an appraiser and they go out and envision your house on the lot that you are buying. The appraiser then tells the bank what they think the house will be worth once it is completed. If the amount is as much or more than the contracted price you are in good shape. If it is less then you have trouble.
The builder called to say he was going to come and drop off a bunch color samples for products that we will be using in the construction of our home tomorrow. He is supposed to have samples of the pre-painted Hardie Plank siding. Again, I have the feeling that cost is going to dictate that we paint the siding ourselves.
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