Any advice on construction loans?

[peaceloveandjulie]

Originally Posted by BarbChil

Julie, be careful when working with contractors and construction loans. Some of the things you want to consider are maybe hiring the contractor to simply do the work while you pay the materials, sub contractors etc. The reason I suggest this is because I've worked for a lumber yard in the past and when contractors started new jobs we would pre-lien the property until the contractor's bill with us was paid and the job was complete. There have been a couple of times where we went on to lien the property and even though the owner had paid the contractor, the contractor failed to pay us and the owner had to pay again to get the lien removed. Good luck and would love to hear your progress!

Thanks for the heads-up! Honestly, this is all so complex that there are some days I'm just ready to say "bag it" and buy a little existing place somewhere around there. Not many small homes in the rural areas available, though, that aren't mobile homes and even most of those are quite big!

[peaceloveandjulie]

Originally Posted by oregonwoodsmoke

All the banks I talked to will consider the land in lieu of the down payment on the mortgage. So I don't have to have the 20% down in cash. However, that is going to depend upon how much your land is worth and how much you want to borrow.

That's with the land paid off, I'd imagine? Yeah, I'm trying to decide the best way to use the cash I'll have from my house sale.

[oregonwoodsmoke]

Originally Posted by peaceloveandjulie

That's with the land paid off, I'd imagine? Yeah, I'm trying to decide the best way to use the cash I'll have from my house sale.

Oh? You owe money on the land? You'd better talk to a couple of banks about it, then. I don't think anyone will give a construction loan for land that isn't free and clear, unless the note holder on the land will agree to subordinate into second position. Why would any sane note holder agree to that?

I know you can get a first mortgage for both the construction and the land as a total packsage, but you must have at least 20% down in cash, and it might even be more that 20% down because it is a higher risk loan.

Banks and financing, what fun. (read that with sarcasm)

[peaceloveandjulie]

Originally Posted by oregonwoodsmoke

Oh? You owe money on the land? You'd better talk to a couple of banks about it, then. I don't think anyone will give a construction loan for land that isn't free and clear, unless the note holder on the land will agree to subordinate into second position. Why would any sane note holder agree to that?

I know you can get a first mortgage for both the construction and the land as a total packsage, but you must have at least 20% down in cash, and it might even be more that 20% down because it is a higher risk loan.

Banks and financing, what fun. (read that with sarcasm)

LOL, yes, even more fun for an English Lit. major to wrap her woolly head around!

That's what I'm trying to decide -- how to best spend the proceeds from my house sale and structure any loan. I could pay off the land and then package the construction of the home (including septic, well, driveway, etc.) using the land and some cash as the down payment. Or I could put all cash down and get a mortgage for construction and land, as you described. Or I could keep paying on the land and pay cash for my basic home build to get the essentials done and then complete the non-essential finish work over time and at my leisure.

The bottom line is that I do have that pre-qualification mortgage letter from a bank, a 4 percentage interest rate, and I'll have a one-time chunk of cash when my current home sale closes. So I have to decide the best and most beneficial way financially of building my little home.

[Jon Wanzer]

Originally Posted by peaceloveandjulie

LOL, yes, even more fun for an English Lit. major to wrap her woolly head around!

That's what I'm trying to decide -- how to best spend the proceeds from my house sale and structure any loan. I could pay off the land and then package the construction of the home (including septic, well, driveway, etc.) using the land and some cash as the down payment. Or I could put all cash down and get a mortgage for construction and land, as you described. Or I could keep paying on the land and pay cash for my basic home build to get the essentials done and then complete the non-essential finish work over time and at my leisure.

The bottom line is that I do have that pre-qualification mortgage letter from a bank, a 4 percentage interest rate, and I'll have a one-time chunk of cash when my current home sale closes. So I have to decide the best and most beneficial way financially of building my little home.

Greeting Julie,

Are you still in Texas coordinating all of this? WOW! It sounds like a nightmare to keep up with. How often do you get out to the property?

My wife and I are trying to avoid the formal loan process altogether by going the owner/builder route doing most of the trades work ourselves. We are planning on building a small house and slowly developing a permaculture homestead, adding as we go.

We will be up there next month looking for work in either Bend or KF and hoping to find property somewhere between Sprague River and Bonanza with the idea of moving to the area, working part-time, and starting to develop the property.

I am getting a lot of good information from you, and this forum as we gear up to make the move.

~Jon

[peaceloveandjulie]

Originally Posted by Jon Wanzer

Greeting Julie,

Are you still in Texas coordinating all of this? WOW! It sounds like a nightmare to keep up with. How often do you get out to the property?

My wife and I are trying to avoid the formal loan process altogether by going the owner/builder route doing most of the trades work ourselves. We are planning on building a small house and slowly developing a permaculture homestead, adding as we go.

We will be up there next month looking for work in either Bend or KF and hoping to find property somewhere between Sprague River and Bonanza with the idea of moving to the area, working part-time, and starting to develop the property.

I am getting a lot of good information from you, and this forum as we gear up to make the move.

~Jon

Hi Jon,
Yeah, it's pretty wild doing this from a distance. I don't get there nearly as often as I'd like but, of course, I wish I was freaking LIVING there now so it's all relative, lol. I've had delays and setbacks unrelated to Oregon and construction.

It was never my intention to do a loan when I started this process. However, it does have its benefits. The sheer number of things one has to take care of in developing land in that area is quite daunting, and I'm doing this by myself. Rolling everything into one manageable package of construction and contractor is looking really good right now.

Keep in mind -- and the county folks will tell you this, as well -- that while you surely can do things on your own and at your own pace, you do need permits for everything and those permits have time limits and costs attached to them. To live on the land as you build also requires a placement permit that needs to be renewed. The clock starts ticking when you begin. Yes, you can renew the permits if you don't finish in time but those costs add up. If a permit is $1,000 and expires in six months and you have to lay out another $1,000, that sux.

As the county told me: Plan carefully and be ready to hit the ground running. You don't want to have various permits expiring on you all of the time because that costs you big-time, in the long run.

And remember that you can "camp" on your land 4 months out of the year WITHOUT a permit now. Unless you have a total buttinsky living nearby who is documenting when you plunked down on that land, who's to say how long you've been there? Get a GOOD camper or park model mobile, build a sturdy structure around it with a good roof that can handle snow load to protect it, and locate it back in your property. That enclosure isn't an accessory building so you wouldn't need a permit for it.

[Hawk J]

American Carports Inc. has built many metal carports & other sound structures around Oregon, over the years, at a fair price, imho. About two lustrum ago i had two built here adding one foot to the legs, for my taller vehicles. I haven't had any problems with them & have handled our mostly minimal amount of winter snow we have been having here.

Installation is included in the price.

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