Buying Land And Building - How?
There are about 3 acres of land for sale on the street where my wife and I want to end up. We've had our eye on this street for some time now. I'm an architect and so we've always dreamt about buying land and building a house. questions:
Asking price for the land (2.85 acres) is 80k - wooded area in the city, 15 min. from downtown.
1. Is purchasing land similar to buying a house as far as interest rates/mortgages go? What are the similarities and differences?
2. How do people get construction loans? Would I get the loan to buy the land as well as the construction loan all at the same time? recomendations?
3. What is a land contract?
other thoughts?
First, I would verify what the current zoning permits and requires by checking the zoning map and ordinance. I would look at the values in the immediate area. Assuming what you have here is one lot that can't be further subdivided, then the neighborhood values should be at least $280-300K.
You should have a RE attorney involved--not just to prepare a purchase contract for the land (with due diligence and other contingencies), but also to be available to review a construction contract before you sign one with a builder. In my area, financing varies. Not all lenders finance a lot and construction. Check around to see who does and what their terms and requirements are. S&L's and others who portfolio their loans (ie, don't sell them) may be good candidates as their underwriting guidelines might be more flexible. Land acq loan may be 75-80% of the lot price.
Whatever you do, make sure you don't have to close on the lot before you know that you'd be able to build on it. I'd suggest interviewing builders and choosing one so that the builder can look at the lot and evaluate it during your contingency period.
What state is the property in? First call the city to see if they no of any problems in that area. When you want to write the contract you should include at least 7 days to do a fesibility study this will let you check the land and make sure it is not wet, have turtles or whatever local problems you may have. As far as loans on land I know in FL most lend on 80% there are a few that will loan on 90%. You could do a construction loan if you are building right away.
Land is in Ohio, 1.5 miles from where I live now. I've been on the site and it seems good to building on although tests would surely be in order. It is zoned residential.
Does the 100 dollar per square foot rule stil apply to single family, or can you do it for less? Just curious what other people end up paying. I'm more concerned with financing the property than the actual site.
Quote:
On 2004-12-16 09:40, jeffm_60 wrote:
Does the 100 dollar per square foot rule stil apply to single family, or can you do it for less? Just curious what other people end up paying.
No simple answer to that. It's going to vary by area and builder, and depend on the bells & whistles you want in the house.
Quote:
I'm more concerned with financing the property than the actual site.
I would check out both, and allow for much longer due diligence period than 7 days.
If you intend to build YOUR primary residence, you may qualify for some better loan programs. For example, Countrywide offers a "Fast and Easy" loan for the lot and construction. If your FICO is high enough, you can plunk down as little as 5% to value of the lot and the structure. They finance the rest. This was available this summer anyway. A construction loan will work off of a "draw" system. Usually, there will be a draw of money by the builder at specific periods during the course of the construction. The final draw of money comes toward the end of the job. The good part about involving a bank is they will send an inspector prior to each draw to make sure the project is where the builder says it should be. I don't recall what the difference in rates on this type of loan is when compared to a typical SFR type loan. Though, having recently done one, I don't remember being shocked by the rate so it can't be too different.
Anyhow, the process, for you to obtain the loan, as I recall is pretty much the same. The builder will have to have plans drawn and there are some details to attend to such as surveys, grading, and permits. You can save a good chunk of cash by using existing plans. Tell the builder you want to use a plan he has already built elsewhere. He may charge you a little for the plans, but someone else already paid a good chunk of cash to have them done the first time. This also helps because you know he was already able to obtain permits for this plan too. (I just remembered you are an architect, so this may not apply so much to you)
One recommendation, when it comes time to submit plans to the lender for financing put every little thing in there you think you might want to have the bank finance. For example, if you are trying to decide between financing your landscaping or paying cash, submit landscape plans and ask for financing up front. The reason being, you will have a hard time getting that money once the loan is approved based on plans without the landscaping. Do this with other things too......Grading, appliances, window coverings, etc.
As far as price per square foot, Nancy is right. (By the way Nancy, I always get a lot out of your posts, thanks) In Lake Havasu City Arizona I am paying about $73/sqft. For an average 3/2/3 SFR. No bells or whistles, just a big ‘ole garage. In the outskirts of Phoenix we were pricing a project at $120/sqft. This, like Havasu, was the cost without the lot. For $120 we were getting all the bells and whistles, granite, 10 ft. ceilings, crown molding, travertine floors and showers. This thing would have been beautiful.
This should be a fun project, when your done you might find you have instant equity too. Enjoy!
Brian