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Financing Update, Lot, Timeline, and Rev. 2 already

I’ve been doing quite a bit of research around what financing is available and what I’ll need in order to buy/build our house, and am quite excited, because about 3 weeks ago I found a viable option for financing.

There is a bank in Rochester, in which they are the lender and servicer of their mortgages. Not only do they lend and service, they don’t sell their loans! So they are stuck with the loan for the rest of their life, for better or worse. Because of this, they are able to modify conditions of their loans so it is not-so-common.

Their name is Normandy Bank and they specialize in “self built” houses, which is exactly what I am doing. Here are the details:

  • Require 25% down payment for the land purchase (only the land purchase)
  • You can borrow up to 90% of the final value of the house (not the construction costs – IMPORTANT!)
  • You need to have 10% of the construction costs as cash reserves, but don’t need to put it down. This is so you can pay stuff before you take delivery
  • 720 credit or higher, 45% DTI ratio
  • You DON’T have to move out of your current house.

I can’t believe it! This is the perfect loan and come late this spring, it’ll be exactly what we are looking for!

So… now I have a loan in mind. Now we have to find the land. Amanda and I looked at a parcel of land on 2 Bolt Rd, Glenville, NY. It is 2 and change acres and has already been site approved for a lot. It’s relatively close to civilization but far enough that we can get 2 acres and a decent amount of privacy. The lot next to it is for sale as well (any takers?)

Amanda is sort of nervous because it doesn’t have woods. She (and I) would love to have property back to woods. I was trying to make the argument to her that we can plant our own woods using privacy trees for now and planting shade trees that will be big when the kids are older. I’m not sure she’s convinced. Other than that, it seems like the perfect lot. There is another lot that is 5+ acres, but it’s pretty far out in West Glenville.

If everything goes according to plan, we’ll be putting a contract on the land in late-Spring with a due diligence period of like 4-6 months to get all of our permits in place before we actually close the land and start breaking ground.

Of course, it’s hard to wait, so I’ve been designing our house already. I started putting in every feature Amanda and I want in a house and I ended up with a 5,000+ sqft house! So I had to shrink everything and move some stuff around and came up with a decent first cut…

First Floor

First Iteration 2nd Floor

So I showed this to Amanda, and we talked through the design. She pointed out some really great things and for the first time, I think she was excited! I think she’s still a little skeptical as to whether this is actually going to work or not 🙂 Maybe I am as well… it’s a huge undertaking, a big dream, and there’s a lot of excitement but a lot of caution as well.

Either way, I took Amanda’s advice back to the drawing table (literally) and came up with a layout. Just a layout at this point, but what do you think?

Second Iteration First Floor

Second Iteration Second Floor

This post is already long enough, but I would love to share some of the details we’ve been working out about the house. I guess I’ll save that for a later post.

The Beginning…

This is it. We’ve finally made the decision that Amanda, Bryan Paul, Mady, Jamyson, and I are going to move out of our 1500 sqft. house and build our dream house.

I built this blog so we can record our progress toward building our house, and plan to update it frequently with pictures, posts, and videos that will be a way for us to not only communicate the status to our friends and family, but also to be able to show our kids as the grow up what it took to build the house they live in.

We’ve been talking about it for years, but were never in a very good position to pull the trigger. I’ll be honest – I’m quite nervous about this because it is a huge undertaking and there are a lot of unknowns.

First, I want to be the General Contractor. The benefits of being our own GC is plentiful. We have much more control, more options, more creativity, and best of all… it’s cheaper! We can probably save about 30-40% if we are careful, and can build the house the exact way we want it built.

There is one significant drawback to being our own contractor (also called owner-builder). Financing. There are very very few banks that will loan to an owner-builder, and those that do typically require that we own the land free and clear, or have to put something like 30-40% as a down payment in addition to the 6 months PITI and closing costs. We just don’t have that money laying around!

I did find a broker that specializes in owner-builder financing. They require 6% of the building costs upfront, which is very viable. There is one huge condition: you have to have sold your house before the bank will even consider you. Ouch! That means that before I can even break ground I will have to sell our current house and move into a rental with no guarantee that I’ll be approved for the loan or that the program will even exist at that time. That’s a big risk to take.

Regarding the land – most banks won’t loan money to purchase land, either. No wonder the industry is in the toilet! I did find a possibility, and without looking further into the details, it looks like the conditions require a 10% down payment (no problem) with a 5 year balloon. Like I said, I haven’t looked into the details, so I’m not even sure it still exists, or if it’s the remnants of an old website.

This past 2 weeks’ events have really put things into perspective for me. I saw a ton of devastation when helping to respond to Hurricane Irene, and it really made me think: now is the time to put this plan into motion. It may not be the ideal time, and money might be a stretch at some points, especially since we’ll have to put a lot of it down for an upfront payment, but I want to start building our memories in the perfect house both Amanda and I have always dreamed about.