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Custom Build Finance Questions
Posted on 5/6/24 at 3:20 pm
Posted on 5/6/24 at 3:20 pm
Doing a custom build home in 12-15 months. First time doing custom build and will be forever home.
Equity in Current Home: $65,000
Equity in Property to Build on: $35,000
Property Value: $90,000
Total Estimated Equity: $100,000 that would be rolled into construction/permanent loan
Estimated Build cost $400,000
20% would be $80,000
Since I have enough equity to cover the 20% typical downpayment for custom build do I need to build a larger cash reserve or would it be more prudent to aggressively pay down the lot loan over the next 12-15 months. Or does the 20% have to be in cash reserves?
Will start talking to loan officers early 2025 but just thinking out loud and in advance.
TIA
Equity in Current Home: $65,000
Equity in Property to Build on: $35,000
Property Value: $90,000
Total Estimated Equity: $100,000 that would be rolled into construction/permanent loan
Estimated Build cost $400,000
20% would be $80,000
Since I have enough equity to cover the 20% typical downpayment for custom build do I need to build a larger cash reserve or would it be more prudent to aggressively pay down the lot loan over the next 12-15 months. Or does the 20% have to be in cash reserves?
Will start talking to loan officers early 2025 but just thinking out loud and in advance.
TIA
9
Posted on 5/6/24 at 3:50 pm to ThatsAFactJack
The equity in your current home will not factor into the construction loan aspect.
They will only loan you enough to cover 80% of the estimated build costs. That includes the appraisal and payoff of the land, so the land equity will be rolled into it.
I’m not exactly sure what you’re asking because it depends on timing of selling your existing home. If you sell at some point during your build, that equity can be used to pay down the new home build (and hence not coming out of the construction loan).
They will only loan you enough to cover 80% of the estimated build costs. That includes the appraisal and payoff of the land, so the land equity will be rolled into it.
I’m not exactly sure what you’re asking because it depends on timing of selling your existing home. If you sell at some point during your build, that equity can be used to pay down the new home build (and hence not coming out of the construction loan).
Posted on 5/6/24 at 5:04 pm to LSUtigerME
quote:
LSUtigerME
quote:
They will only loan you enough to cover 80% of the estimated build costs. That includes the appraisal and payoff of the land, so the land equity will be rolled into it.
So paying down the lot loan is advantageous in regards to the construction loan.
quote:
I’m not exactly sure what you’re asking because it depends on timing of selling your existing home. If you sell at some point during your build, that equity can be used to pay down the new home build (and hence not coming out of the construction loan).
Home will be sold in conjunction with completion of build and the equity will be rolled into permanent mortgage.
TIA
Posted on 5/6/24 at 5:21 pm to ThatsAFactJack
quote:I’ve built 3 forever homes.
Doing a custom build home in 12-15 months. First time doing custom build and will be forever home.
Life has a habit of throwing curveballs, so make sure you incorporate some features everyone likes.
Posted on 5/6/24 at 6:46 pm to ThatsAFactJack
Take your estimated cost to build and add 20% to it for a custom built home. Also keep 50k on the side for expenses that may come up and closing costs when it’s time.
Posted on 5/6/24 at 8:03 pm to ThatsAFactJack
quote:
Will start talking to loan officers early 2025 but just thinking out loud and in advance.
Talk to one this week and get a game plan going over this next month. Run various scenarios by them.
Posted on 5/7/24 at 12:24 am to ThatsAFactJack
quote:
Doing a custom build home in 12-15 months. First time doing custom build and will be forever home. Equity in Current Home: $65,000 Equity in Property to Build on: $35,000 Property Value: $90,000 Total Estimated Equity: $100,000 that would be rolled into construction/permanent loan Estimated Build cost $400,000 20% would be $80,000 Since I have enough equity to cover the 20% typical downpayment for custom build do I need to build a larger cash reserve or would it be more prudent to aggressively pay down the lot loan over the next 12-15 months. Or does the 20% have to be in cash reserves? Will start talking to loan officers early 2025 but just thinking out loud and in advance. TIA
I remember the first time I built my forever home 3 years ago
Now I can’t build my forever home with a 500k down payment.
This post was edited on 5/7/24 at 12:34 am
Posted on 5/7/24 at 5:49 am to ThatsAFactJack
Whatever estimate you get to build will turn out to be much higher in the end. Don't be in a position where you are emptying coin jars to make a $400K build work. Next thing you know is that it comes out to an additional $30K or more. Can you afford that extra cost?
I support building the house, but crazy things happen during construction with unexpected costs or rises in building costs. Expect the unexpected.
I support building the house, but crazy things happen during construction with unexpected costs or rises in building costs. Expect the unexpected.
Posted on 5/7/24 at 7:54 pm to Rize
quote:
I remember the first time I built my forever home 3 years ago
I built my first two years ago....
I love my home and have no plans to leave. But I now see a path in other directions if the situation is right. I think most of us remain dreamers and risk takers throughout life. It does end in our 40s or 50s.
To the OP- Call the lender and ask those questions. I built in 1996 and used the land as my down payment since the loan was based on the appraisal (Which includes land value). That may not be possible in your situation.
Good luck with the house plan. Sounds like you have a vision. You will make it happen, I am sure.
Posted on 5/8/24 at 7:29 am to ShermanTxTiger
quote:
I built my first two years ago.... I love my home and have no plans to leave. But I now see a path in other directions if the situation is right. I think most of us remain dreamers and risk takers throughout life. It does end in our 40s or 50s. To the OP- Call the lender and ask those questions. I built in 1996 and used the land as my down payment since the loan was based on the appraisal (Which includes land value). That may not be possible in your situation. Good luck with the house plan. Sounds like you have a vision. You will make it happen, I am sure.
Yeah I built mine in 2020 and moved in December of 2020. I had enough property to build a shop and really thought I would be there for a long time with my 2.6% interest rate. At the 2,5 year mark last June my wife got a job offer we couldn’t refuse so now I’m in Spring Texas in a 1600 sqft foot rental.
Baton Rouge mortgage was $2590 a month and to get something similar over here with the rates and taxes it would be $4500 to $5500 a month.
Posted on 5/8/24 at 7:59 am to Rize
quote:
Baton Rouge mortgage was $2590 a month and to get something similar over here with the rates and taxes it would be $4500 to $5500 a month.
Posted on 5/8/24 at 8:11 am to ThatsAFactJack
I would start shopping for loan officers now. Check with the credit unions first.
Let them know your timeline, they will work with you.
Let them know your timeline, they will work with you.
Posted on 5/8/24 at 12:18 pm to ThatsAFactJack
quote:
aggressively pay down the lot loan
THIS
A very general rule of thumb when building, lot value x 5 = total home value,
Posted on 5/8/24 at 3:22 pm to ThatsAFactJack
quote:
Equity in Current Home: $65,000
Equity in Property to Build on: $35,000
Property Value: $90,000
Total Estimated Equity: $100,000 that would be rolled into construction/permanent loan
Don't think any of this will be relevant when getting construction loan
quote:
Estimated Build cost $400,000
20% would be $80,000
Have you gotten this build cost under contract? Have plans and a builder selected? Need to get this ironed out first.
Also most banks will loan based on the appraised value of your future home. If it appraises for higher, less down payment. If it appraises for less than your build cost. You will need a bigger down payment.
Also some do as low as 10% of appraised value.
quote:
Since I have enough equity to cover the 20% typical downpayment for custom build do I need to build a larger cash reserve or would it be more prudent to aggressively pay down the lot loan over the next 12-15 months. Or does the 20% have to be in cash reserves?
They wont roll over your equity. They will want cash.
This post was edited on 5/8/24 at 3:23 pm
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