Getting a [construction] loan from a bank

What would i have to take to my bank to get the money to build a house? Materials cost, inspection fees, foundation & plumbing contractors, title search? Reason being that i would really like to build my own house rather than buy one that’s on the market.

It is something i have always wanted to do since i have the knowledge and skill (except foundation and plumbing, aside from faucet replacement). I can do the framing and electrical and roofing, etc. If i whip up something with Visio, would the bank also want to see the design/blueprints from Visio?

Technically, i think this would be considered a mortgage since it is a loan for a house, just a house that has to be assembled first :slight_smile:

Do you already own the land, or will that cost also be part of the loan? These things are usually called “construction loans” and they are a bit more expensive than a standard mortgage, since the bank runs the risk of being stuck with a half-finished house if you default. (ETA: Once the house is finished, you can refinance as a traditional mortgage.)

Best bet is to call the local banks and ask about construction loans; they’ll tell you what you’ll need to bring. I would hazard a guess, though, that they’ll want to see plans by a certified architect or draftsman, and of course all the local building permits and whatnot.

I hadn’t even thought about the land! :smack: Might as well figure that in as part of the loan as well.

Wow. I rent, and it might just be the influence of the surrounding area but … wouldn’t that be the bulk of the cost unless you build somewhere with no utilities or neighbors?

Relative cost really depends on the area. On the beach in SoCal, figure a million daollars a teaspoon for land & you can put a shack on it if you want.

Around here you can buy land just outside the suburbia vs. farmland border for $20K/acre, and put a $1 million house on it if you want.

We did this about 4 years ago. We owned the land we planned to build on, as well as the home we were living in at the time.

The bank wanted a professionally drawn set of plans, as well as a construction cost estimate. It didn’t take that long to get approval, maybe three weeks. They mostly want to be sure that the house will be worth more than the construction costs.

As construction proceeds, bills are submitted to the escrow company and monies paid out. Each month you pay interest on the money paid out by the bank. So the first months interest might be $200, but as more and more money is paid out the amount of interest goes up. So the last months interest might be $2000.

After the home is completed a conventional mortgage is created to pay off the construction loan and you move in.

Oh, and I’m not too far from LSLGuy and we bought 5 A about 7 miles from town for $24K.

One issue that arises from building in the “country” is what they call “comps”. Those are other homes in the general area that are similar to what you want to build. They are used to establish a value for your project. So if there are few homes around, or yours is going to be nicer that the ones already there, it can be difficult to establish a value. Additionally, building with inovative construction techniques can also be an issue. Want to build an energy efficient geodesic dome in an area full of conventional houses? Good Luck with that.

As moderator: I edited the thread title to make it more descriptive.

As poster: There are plenty of operations that advertise owner-builder construction lending on the Internet. I’m not recommending any, but here are a few that Google pulled up:

http://www.ownerbuilderloan.com/
http://www.ownerbuilder.com/ConstructionLoan.shtml
http://www.buildmax.com/

Be aware that banks are very leery of loaning homeowners funds for construction when the homeowners are the general contractors.

Typically the bank wants you to own the land outright.
You’ll need plans, building permits, budget, and a completion date.
You’ll pay just interest on the money used so far.
They’ll require signed mechanics lien waivers at the end.
The bank will convert it to a regular mortgage after construction is finished.