Building A Home

[wonka27]

Hi folks!

Well, in the next year I would like to acquire a new residence. I''d love to buy a house with my soon to be fiancee. Her and I have been toying around with the idea of building a small home instead of buying something established.

Anyone have any advice on places to look for educational reading online? I''d love to hear personal experiences on building a home too! I am also interested in modular homes, as I have seen some really nice ones online that look exactly like stuff that is being built on site. I think my biggest fear right now is that the way I see homes going up today, I have a hard time believing they are going to be as durable as an established home build from brick in the 40''s - 60''s.

Any comments, advice, direction is greatly appreciated!

 

[Kamuelamom]

This is a loaded question as I am smack in the midst of completing my new home. We have done a semi-owner/builder thing so there is a lot on our plate, most of which we have survived without too much incident. It has been taxing, tiring, wonderful, exciting, scary, expensive, educational and everything else in between. If you are somewhat of an organized person and can survive when things don't always go as planned, I say you can probably handle an owner builder situation. Otherwise, save your pennies, hire a contractor and move in when it's all done. Just depends what you're up for.

If you want specific info, please PM me and I'll forward you my email address. Fire&Ice also has had a lot of experience building her home(s).

I live in Hawaii and modular homes are not widely used here. I'm not sure why. I briefly looked into them while researching our options. In the end, we decided to build a full custom home. It is roughly 85% complete and we are diligently working to complete it within the next 4-6 weeks, hopefully. The next home I hope to build shall be a spec home about a third of the size of this one. And I hope after this experience that I'll be able to do that with my eyes closed.

Good luck with your decision.

 

[wonka27]

Thanks for your insight Kamuelamom!

I don't know if I have what it takes to serve as my own contractor

I just feel like I don't know enough...but maybe I can learn and do it. I'm sure it saves quite a bit of money! The one good thing we have is my g/f's brother-in-law. He is a young, but incredible carpenter. He and two buddies built a home on their own for a friend. It took them a long time, but they were able to do it with minimal extra help (plumber and electrician) for a huge savings. I might approach him to be a contractor. I could get an experienced person who likes things done right, probably for quite a reduced cost.

I always thought of modulars like souped up trailer homes. However, I came to learn, many of them are just as beautiful as site built homes. Although I've only read "modular" websites, they talk about more materials used and more measures to hold the wood together because of transport, which ultimately leads to a sturdier home in the end. Additionally, the controled environment they are built in helps reduce defects that can be caused by exposure in the weather. I would guess the small, isolated nature of Hawaii might cause modulars to suffer due to lack of options like I have here in and around PA.

 

[Kamuelamom]

Wonka27, I got your pm.

IF, and only IF you have any kind of knowledgeable and experienced person in the trade at your fingertips would I recommend the owner-builder route. My husband is an experienced electrician who has a general knowledge of the scope of a construction project. In addition, I recruited smart and experienced folks to help us.

I'm no dummy afterall, and I know my limits.

Otherwise, hire a good contractor, as mistakes will be costly. Shortcuts can lead to mistakes so sometimes you get what you pay for.

In all cases, do your homework so no one can pull anything over you. Or at very least, consult with folks you trust (who are experienced) if you have any doubts about what folks are telling you. I feel that knowledge is power and have learned so much in this process. My husband is actually proud of me for managing the project w/o any prior experience.

Having the organizational skills definitely helped my lack of construction knowledge.

Good luck.

 

[fire&ice]

Hi Kam! Glad to see you are making use of that GREAT porch sooner rather than later!

Organization - yep. You have to be. Also, if I can find it I will try to locate a quiz to see if you have the spacial abilities & apptitude for construction. One really has to be able to see "what comes first". It's a process that is logical & a person who is very logical can succeed at being a contractor.

Besides organization & logic, one must have TIME. It is very time consuming.

Also required - cash & credit. I'm not sure a bank would loan a first time homeowner non contractor the money. You also have to be familiar with how the draws work. And know how to work your building inspector.

That said, I couldn't recommend it to everyone. I do have a logical construction mind. I also have a husband who is an architect w/ an MBA which focused on Construction Management. At the time we built our house, I worked as a construction project manager for interior jobs. I had to go part-time to be able to have the time for builing our house. All of this behind us & we had trouble! Again, sounds easier than it is - ESPECIALLY when it is your OWN home.

Modular homes have come a long way. That said, many developments will have convenants against them. And, buying a piece of land somewhere is really tricky.

My advice to you - buy an older home that has potential but is currently butt ugly. Make sure this home has a good roof, sound electical, heating, air & plumbing. In other words, all the systems (which is the major expense in renovations) work well. Since you have someone close to you that is a carpenter, buy something small in which you could add an addition - perhaps a one bathroom home that you could expand into 2 bathrooms to add enormous value to the home. Or, expand the kitchen - these are the two things that will add the most value to a home. Whatever you do make sure it is neighborhood appropriate. In other words, unless you plan on staying in the house long term, you may not be able to recoup the cost of a granite countertop in a starter neighborhood.

Best of all - good luck. Homeownership has it's headaches; but, it's grand!

Remember - a can of paint (i.e. cosmetics) is cheap. Hubby helped a friend change the exterior of a home by adding a portico - it transformed the house into a home with great curb appeal. It was cheap! Drive around & see what appeals to you curb wise. Pick an ugly house -see what you can do to make it look like the ones w/ curb appeal. Also, looks can be deceiving from the exterior.

As with any renovation & construction, always shop around. We have a a lower & upper front porch. With our proportions (10' ceilings - a great southern thing to help w/ air conditioning), we needed a large columns for scale & support. I had one building supply place (who lumped all the material as one price & didn't separate it out for you to compare places & pieces) price out columns at 1k a piece (we have six). I ran away from that place & found other building suppliers who will piece out stuff. Our columns ended up costing around $200.00 each. By piecing out the job with several different suppliers, we saved thousands painlessly.

Probably more information than you wanted.

Be happy to answer any questions though. I will ask hubby about some of the new modular home stuff. He is a partner in a commercial construction company; but, had to build a residence for a campus & looked in some of that. When we build ours in '88 we used some prefab stuff - like trusses & joists. What it saves is labor costs.

 

[wonka27]

Hey...you guys are great! Thanks so much for the advice.

First, about the people at my fingertips. Like I said, her bro-in-law is young, but a very good carpenter. And he was part of a three man house building project. If this gives him enough know-how, I don't know. I guess the one problem there is the fact that it is the biggest purchase of one's life, and if something goes wrong, I'd hate to see the family fallout! Her uncle actually owns a construction company for years, but specializes in commercial properities! Too bad, if he were a residental builder, we'd be set!

I don't want to sound negative, but I think you guys scared me out of being my own contractor. It is obvious you have some connection to what you did...where I don't. So if I build, it will be with someone else running the show!

The modular thing still interests me. Fire, I'd love to hear your hubby's input if you ask him. Still, I do understand finding the right property will be tough. The big thing I'm finding with developments, is that the lot sizes seem to be 1+ acres. To be honest, I'd like something much smaller. I'm not the type of guy that wants to spend his life doing landscaping work

In the end, unless something interesting happens, I will probably go with a home already built. There are nice ones out there, and some that aren't so nice, but can be nice. Her B-I-L bought a ranch for $90K and revamped it completely. It is now worth close to double what he paid in two years' time. That may be an option, and let him work on it for us. I'm sure we'd get a good deal there.

Her and I really need to evaluate what route to go. We've talked about renting, starter home (<$100K), or going for what may be a life long home. All have their own positives and negatives, it is just a matter of finding what works best for us.

I will be back with more questions I'm sure. I really appreciate your input and possible future input!

 

[fire&ice]

Wonka, tell us about your area. What is the average home price for a starter home? Are the neighborhoods relatively new or do you have old established neighborhoods? How are you school systems - perhaps this is not a priority for you now - but it is one of the single most determination of home prices/sale turnaround. Ya kknow - three words in real estate - Location, Location, Location!

Also, how long have you lived in your area? If less than a year, then I would rent so that you can investigate the area w/o laying out the cash. It takes time to understand the nuances of an area.

Also, not to rain on your parade - but most developments have convenants as to what builders you may use. It's not as simple as just buying a lot, at least not in our area.

I did ask hubby about modular homes. He said they run the gamut. He asked specifically what system you were looking at. Some are really nice. Some are really crap. He did say he saw alot of potential in that area. He thought it to be the way of the future. He did go w/ stick built in the end because of greater control.

One thing about new construction is that, in general, you don't have as much maintenance cost. Our second home was built in 1925. It is a labor of love; but, this goes wrong - that goes wrong. So, if you go that route, make sure you have some cash reserves for whatever.

My prediction - just as bungalows are now all the rage (birthed out of the interest in the Arts & Crafts/Mission movement)I predict in the next 5 years that 50's cool rancher homes will be the next big thing. Mid century modern collecting is the buzz word & it takes about 5-10 before the Architecture is appreciated as well. Think turquoise!

 

[Kamuelamom]

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On 9/3/2004 12:09:24 AM wonka27 wrote:

I don't want to sound negative, but I think you guys scared me out of being my own contractor. It is obvious you have some connection to what you did...where I don't. So if I build, it will be with someone else running the show!
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It's important to know your limits. The consequences could be devastating if you bite off more than you can chew.

Fire&Ice is an old pro at this. This is our second home; the first that we are building. And at times I wished I went with a packaged home, which are available here (predesigned with the option to modify), but the custom route ended up being the best option for us. Though hard work, I can taste the sweet end, all the way to when I will thoroughly enjoy sipping my toddies on the porch, waiting for Fire & Ice's first visit.

 

[wonka27]

Ok fire, let me see if I can answer some of your questions!

I live (for my whole life) in Allentown, PA which is about 50 miles north of Philadelphia. Allentown itself has about 150,000 people, but there are ajoining cities (Bethlehem, Easton, etc.) that make the area pretty big. The central areas are older townhomes built in the early 1900's, with single homes built outward from the central areas ranging from early 1900's to present day. There are plenty of cape cods and ranches from the 40's & 50's. As a teacher I'm up to speed on school systems! I know where I live now, is not where I want to live forever

There are some decent options though!

It's funny you ask about average home prices. There was something in the newspaper just the other day. In the area as a whole, average prices range from probably $150K - $200K. A starter home can go from, well a crappy older townhome can go for under $50K probably up to $125K. But I guess starter home prices are relative to what the starter buyer wants to spend

. Personally, if we go the "starter" route, I want to stay at or under $100K.

Here is a link to a home that came up just in the last week (and will probably be gone next week!) that would give you an idea of what I think of a "starter" home:

http://yourlehighvalleyhome.com/IDD984

Although a little more than I'd like to spend, it is a nice looking place (and I drove by as it is just blocks from my school where I work). I like it because it is a twin with some space opposed to a townhouse. It is very very close to my work and in a city that has the second lowest tax rate in the county. If only it were 6 mos. from now!

See, while my g/f and I are relatively on the same page, we do have some differing opinions. I'd be happy with a twin the rest of my life. I grew up in the city and am used to living in a townhome. Small property to maintain, but people are on top of you and parking can be an issue. She on the other hand has lived in a single, so she needs more space. She is willing to go the starter home route, but ultimately wants a single. I have no problem with that, as long as the property isn't too big! Between the two of us, our gross income right now is about $85,000/yr.

I will have to do some research for building a home/modular homes if we do go that route. I guess we have to make sure the land we'd buy would be available for use as a residence. Then the modular issue could come into play as well (whether or not you could put it there). I think maybe today, since we don't have much to do, we may go down to the one builder and walk through their model modulars and see what it is all about. Thank God we know people in the construction business that can look at the specs and materials for us to see if we are getting a good product. We will see with some time if that is a viable route for us to go!

I do have one question. I know you have both built. What do you think of the durability of a new home opposed to an older brick. These brick homes look like they'll last forever if maintained! I look at new constructions and they just look like a stiff breeze could knock them over. Would a new construction withstand the years and have selling value in the end? I'm guessing yes if you both did it, but I guess I'm looking for some verification!

You guys are great...thanks for helping me out as I begin my learning on home buying.

 

[fire&ice]

Wonka, you are in a very good situation. Home prices are very affordable in your area. Your income much more healthy enough to support a 100k mortgage. I don't know what personal debt you have; but, your total debt can be about 33-38% of your monthly income - i.e. approx total monthly debt of about 2300- 2500. The home debt is around 28% of your income. From that you can figure out what kind of mortgage payment you can qualify for & work back to how much total price you can afford. You will need a 20% down payment ( or a loan to value of such) to avoid PMI. Our first home was a FHA. With that, came many benefits including rolling in closing costs & a very small down payment. We did have to pay the PMI though.

In general, single family homes will always be the best investment - all things considered equal. Cute twin though.

As for older homes, often they are built better - the building materials were available then. You will get certain amenities that most newer homes would have as upgrades. For example, look for hardwood floors, tile bathrooms, tall ceilings (a staple in the South - not sure this is a benefit in your area), better molding, etc. And, they don't build homes with thick oak beams anymore or plaster walls!

Older homes are a labor of love though. We had a slate roof on our turn of the century home. It was beautiful (and cost prohibited today). But, we chased roof leaks all the time. As I mentioned, try to get one with updated systems - BUT done right.

My suggestion is start to drive around & go to all the open houses on the weekends. Educate yourself in these 6 months. And, again, Location, Location, Location. And, it's never a bad idea to buy the least expensive house on the block!

BTW, I started adult life as a teacher. Love the kids, couldn't deal with the parents. A noble profession though!

 

[wonka27]

Yeah, home prices are pretty affordable from what I've heard, but they still seem expensive to me

As for debt, we each have car payments totaling almost $700 (she had to have an SUV...ugh!) and her school loans of $225 a month. I don't know if debt includes stuff like insurance, etc., but if it is strictly loans, that is it. I busted my hump the first four years out of college to pay my school loans off so I'd be in better shape today, and am glad I did! I'm projecting by next April or so (when we'd probably officially want to start making offers), we should have about $20K saved up between the both of us. With closing costs, and the need for furnishings, appliances, and keeping a small amount reserved, the 20% down really has very little shot of happening. It could be close if we keep the price of the house down.

For the time being, I'll keep looking around and learning! I'd love a brand new house with all the features I want. However, maybe getting the starter home would help us understand more what we want and don't want. We'd probably be able to keep saving well in that situation too, and have a nice chunk of change 5-7 years down the road to maybe build then or get a better house.

Thanks for all your help! I may be back periodically to ask more questions as they arise...you folks are a wealth of information!

 

[fire&ice]

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On 9/4/2004 11:39:55 PM wonka27 wrote:


As for debt, we each have car payments totaling almost $700 (she had to have an SUV...ugh!) and her school loans of $225 a month. I don't know if debt includes stuff like insurance, etc., but if it is strictly loans, that is it. I busted my hump the first four years out of college to pay my school loans off so I'd be in better shape today, and am glad I did!

Debt is anything owed. Credit card, Department store, student loan, car loan, etc. Insurance would not be included as those are "expenses". Your real estate taxes & insurance will be included in your payment. You have to find out how much those will be before you can do get a figure for how much they will let you borrow.

If you can't come close to the 20% (remember that is loan to value), then you may want to consider a very minimal downpayment - remember - other people's money.

Really, do look into FHA financing. They have caps on how much the home costs; but, they are great for first time homeowners as you can even roll the closing costs into your mortgage. Make sure you shop around for the best rates, etc. Get recommendations from friends. Down here they are offering a no closing costs loans - and I do mean NONE. That's how hot the secondary buying market for mortgages is.

I keep talking about the loan to value because when we built our house we actually received money back & didn't have to pay for PMI. The appraisal came in much higher than our "actual" cost for the land & house. The 20% equity was already met via sweat equity. They have really closed the gaps on people being their own contractor though. If your future BIL has a contractor's license & insurance, then he may sign off on it - but that's a real leap of faith!

Good for you for paying off your student loans! Yep, you young kids

and car payments. The good side of those is that they do establish credit. Make sure you pay & pay on time. You will have a very hard time getting a mortgage if you don't.

Pick up those real estate books they give out free at the grocery store. And, start pounding the pavement going to open houses. Save the cut sheets that they hand out & make notes - what you like - what you don't like. Don't focus on "decorating". Focus on things that are tangible and can't change in a house. Again, a can of paint is 20 bucks.

Good luck & report back in from time to time. Be happy to answer any questions & I'm always available for an opinion.

 

[wonka27]

Thanks fire! You've been a great help and support.

I hadn't thought about the FHA option, but I will learn more about it! I'll keep my eye out for good deals on closing costs too. It is tough, because you may get a good deal there, but might pay for it and then some with a poor rate. Home buying is a big time numbers game! Thank God I'm a business education teacher!

We'll be alright with our credit! Both of us are around 750 with our scores

 

[fire&ice]

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On 9/5/2004 12:14:12 PM wonka27 wrote:


Home buying is a big time numbers game! Thank God I'm a business education teacher!

We'll be alright with our credit! Both of us are around 750 with our scores

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It is a numbers game!

But, remember rules can be broken (well manipulated)

Good for you on your credit scores. Keep up with those!

 

[aljdewey]

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On 9/4/2004 11:38:26 AM fire&ice wrote:





You will need a 20% down payment ( or a loan to value of such) to avoid PMI. Our first home was a FHA. With that, came many benefits including rolling in closing costs & a very small down payment. We did have to pay the PMI though----------------

Actually, if your credit is good, you can go another route to avoid PMI.

Rich and I are in the hunt for our first (and likely only) house, too. Our mortgage company has preapproved us for an 80/15/5 loan.....5% down, 80% principal mortgage at current rate (it's 5.875%, 30-yr fixed when I checked), and the 15% second for 7.625% 30-yr fixed. Because of this structure, we won't have to pay PMI even though we're only putting down 5%.

It also gives us a way to "lower" our mortage down the line. We want to accelerate the payment on the second mortgage, and when we pay it off, our mortgage will "go down" nearly $350 per month. A traditional 95% LTV wouldn't give us that....we could accelerate the payments, but the mortgage amount wouldn't go down.

We looked at FHA, too, because we're both first-time buyers, but it didn't do much for us because we got the same interest rate elsewhere. The advantage is lower down, but we don't want lower down at the expense of higher mortgage.

BELIEVE ME, I wish we could find something in the range you're talking about, Wonka! In the North Shore of Boston area, there are only 2 towns we can touch at this point, and to get about 1500-1600 SF, we're facing about $325-350K. YIKES. And that's with no yard....in the 8000 s.f. range...which is fine with us, because Rich ALSO doesn't want to become a de-facto landscaper.

Those two towns have horrendous school systems, but to us, that's actually a plus. We aren't having a family, so we won't be supporting a system we won't use.

 

[wonka27]

Wow aljdewey! I guess I should be happy with the home prices around here. That looks like probably double the going rate in Allentown, PA! It is amazing how much prices vary by area.

I saw that structure (I believe I did anyway) on Wells Fargo the other day. I guess the second, smaller loan really isn't a mortgage loan? I may have to look into it! That would work well for us, because no matter what we buy, I want to try and pay extra to shorten the loan. Probably will go with a 30 yr, unless we go the starter home route with something $100K or less. My ideal feeling is to try and pay off a mortgage in 15-20 years, although with kids coming into the picture one day, it may be easier said than done.

Do you have any suggestions on mortgage companies to look at?

 

[fire&ice]

Wonka, you are young. I wouldn't race to pay off your mortgage quickly. Al & I are older. 15 years appeals to us more. Interest rates are at a long time low. Take advantage of that. Plus money now is worth more than money in the future. Down the road, you can always structure your payments for a 15 year term via your own free will. Most (if not all)mortgage companies don't have a pre-payment penalty. But, look into that - some have clauses about how long you can flip the mortage.

Every time we refinanced we took money out. We used that money for investments making far more to cover the interest paid to mortgage company (not even taking into account the deduction on taxes).

Also, don't discount the interest deduction on your taxes. Itemized deductions are a good thing.

Consider how long you want to stay in a house. At your age, typically people don't stay in their first home. But, you never know. We built the house in the country as spec. We've been there since '88 & have no intention of selling.

There are lots of creative financing out there. The banks, institutions *want* to loan responsible people money. If I recall correctly, Mara used lending tree to find the best rate. I've never looked into that; but, it seems like an interesting proposition. Another thing to consider & this will sound crazy, many institutions will give you an interest rate break at around $115,000. It cost just as much for them to process a 125k loan than a 100k loan. They make more money off of the larger loan. Pay close attention to your closing costs, especially if this is a starter home for you. In the long run, a higher interest rate makes sense over cheaper money if you aren't going to stay in the house long. We received about 350.00 back from our re-fi company vs the conventional bank estimate of us paying close to 2k in closing costs. Paying points only benefits the mortgage company. The only reason to buy points is to qualify or if you think you are going to live in the house forever.

I guess what I am saying. Buy more house than your target 100k. If you buy in the right location, houses do appreciate. Real estate has yet to disappoint us financially - commercial or housing. Chances are with the research you are doing, you will find a good property. Heck, we've even made money selling *options* in some heated markets.

I will PM you with the mortgage company we used. It is my understanding that they only service two states (one not being yours) - but that may have changed & at least you can see their site. They take applicatons only on-line. They sell all their loans to Principal financial. Funny, because I talked to Principal (our original holder) to re-fi. They wanted close to 1k to process our re-fi. Crazy that rather than negotiate that fee, they let us walk into another mort. co. who re-sold the loan to them. Bureaucracy at it's finest.

How much is PMI these days? Back w/ our first loan, I don't remember it being that much & I think it capped at 5 years. We received a refund. I do remember that. We were in our house less than 2 years. But, that was in 1987. If I recall correctly, we rolled the PMI into the closing costs w/ the FHA loan. I think our out of pocket expenses was less than 1k.

At the end of the day, who you apply with for your mortage isn't going to be the one servicing. Get the best deal. Do look into FHA.

And, just something to think about w/ the length of terms. Many people swear by 15 years. Our last re-fi w/ the country house was a 15. We went w/ 30 year on our city house b/c we may rent it.

Again, good luck.

 

[Kamuelamom]

Wow, lot's of great information exchanging here. Al, that's a very creative option you were given. With the low interest rates and good credit, there are certainly deals to be found out there. Jeez, I just sold my house and it sounds very compatible with the prices in your area. Sounds real high priced. The market here is totally insane right now. Extremely over inflated. I guess we came full circle since when we bought it 15 yrs ago, we bought in the peak of things back then. 8 months later, my house was worth about $40k less. Oh well, all things being equal, I think we did OK.

Fire&Ice, I shoulda consulted you LONG ago.

We have excellent credit so have never had a problem borrowing money, but that's the problem. The problem is whenever you borrow, you sure need to pay it.

We don't like major debt so we stick to our mortgage and what's comfortable per month, and sink the rest into savings cuz we are extremely poor investors,

and enjoy our kids with the rest. We live a very simple life so our debt ratio is very small. Banks love that.

You are correct, many folks swear by the 15. I did too though we never used that option. My SIL eventually convinced us that if we can afford the larger payments for the 15, then amortize it for 30 (for smaller monthly payments) and then just pay down the principal to the amount that's comfy every month, and that will bring it down in the long run too. It's worked for us, we always pay extra to principal every month and sure enough it is fun to watch that principal go down gradually, much quicker than just with the normal monthly P&I payments.

Wonka, there is a lot of good advice being given here, especially by Fire&Ice. From what I know of this great lady, she has indeed been there and done that.

 

[fire&ice]

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On 9/8/2004 2:04:31 AM Kamuelamom wrote:

We live a very simple life so our debt ratio is very small. Banks love that.

.----------------

We have always been like that for personal stuff (cars, etc.) Free money has always been of interest to me though. This past car purchase (almost 3 years ago)I couldn't resist the free interest. The way I look at it is I'm making money off of the deal even if it just sits in the bank! I pay off *all* my credit cards every month though! If I don't have the money, I don't spend it. Simple enough. Keeping our personal debt low has always been priority for us.

But, for investments (shorter term ones) I'm a big believer in other people's money *if* the investment can support the payments. Money is so cheap to borrow now.

 

[wonka27]

This is great information! I agree with a large majority, if not all of it.

Isn't it a shame they don't do 0% on mortgages! My car and my g/f's are both on 0% loans. Granted, you don't get the rebates usually, but it tends to work out slightly better for you in the end.

I'm hoping the home prices hit the crapper in the next few months, but from what they are saying, that probably won't happen. Oh well

 

[wonka27]

Hey fire -

Quick question. I've been doing some initial reading on FHA loans and hope you can verify my learning. From what I've seen, FHA loans do not use typicall PMI insurance. They build their own insurance into the loan (I think it said 0.5%/yr) until you reach certain equity levels (depending on the loan type). Is this correct? Do you know when you see a loan rate for FHA, does it automatically have that built in or is it added on later. (Example: I saw an FHA rate of 6.5% 30-yr 0pt. loan. Is that rate including the insurance or would the effective rate really be 7% when adding in the insurance?)

Any comments, suggestions, or learning sites on the subject you know of would be completely appreciated!

 

[doxiemom]

This isn't exactly financial advice but these are some things I would definitly check on for peace of mind.

My DH and I are looking to buy a house as we speak (as first time home buyers). We put an offer in on one and meet with the lender on Monday.

Also I am a city planner here in our city’s zoning office. I have easy access to a lot of maps and info that I know a lot of people don’t even think about.

I urge anyone who is going to buy/build a house to visit your local planning/zoning or code enforcement office. I actually have brought a lot of these issue to my agents attention.

And here is a list of questions I would suggest asking:

1) What is the zoning of the property and the surrounding property? If you are in the middle of a developed residential area, it may not be to much of an issue, but if there is surrounding open space find out what it is zoned and what could go in there, ie. a PUD or subdivision, commercial, industrial……

I can’t tell you how many times people have come into our office very upset that they bought an expensive house and multifamily, a factory, etc… is now being built on the empty lot behind them.

2) See if the city has a land use development plan and make sure that area isn’t supposed to be eventually converted to another type of zoning thus possibly making the home nonconforming.

3) Check out what Flood Zone it is in. This can affect insurance rates and usually the house has to be built above flood elevation level. (Usually this is taken care of though the building or inspections department and you would need to provide an elevation certificate from a surveyor).

4) Make sure that there aren’t any easements on the property that would prohibit you (or the buyer after you) from adding an addition, carport, garage, accessory use structure, etc…

There are a few other issues I can think of too but it really would depend on the area. Watershed regulations, future right-of-way and road widening....

Happy house building!

 

[fire&ice]

----------------
On 9/11/2004 8:59:41 AM wonka27 wrote:

Hey fire -

Quick question. I've been doing some initial reading on FHA loans and hope you can verify my learning. From what I've seen, FHA loans do not use typicall PMI insurance. They build their own insurance into the loan (I think it said 0.5%/yr) until you reach certain equity levels (depending on the loan type). Is this correct? Do you know when you see a loan rate for FHA, does it automatically have that built in or is it added on later. (Example: I saw an FHA rate of 6.5% 30-yr 0pt. loan. Is that rate including the insurance or would the effective rate really be 7% when adding in the insurance?)

Any comments, suggestions, or learning sites on the subject you know of would be completely appreciated!----------------

I wish I could answer your question. We bought our first home in 1985-6 or so. My answer may be antiquated. I do not remember shelling out money for PMI. It was rolled into our mortgage. So, what you say may be true. We did, however, receive a rebate (which many people fail to pursue). That would indicate some sort of paying up front - or at least on a graduated scale. Any mortage company should be able to answer your questions.

The beauty of an FHA loan is very little money is needed up front. Granted our loan was only 68k; but, I think we were out of pocket only a grand or so. Freeing up cash for some renovation which added value to the property - and could release you from PMI if you re-fi w/ a new appraisal.

Doxiemom is correct. It sounds easy - buy a piece of property - build a home. But, it's really not. Identifying a piece of property that *suitable* & *buildable* is key. Again, Location, Location, Location. Ours was a "throw away lot". A large parcel was divided by an easement. When the parcel was sold, the buyers refused to pay for the property on the other side of the easement - a relatively small piece. We bought it cheap & were able to add to it. Don't buy any piece of property without doing due dilegence.

 

[aljdewey]

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On 9/11/2004 8:59:41 AM wonka27 wrote:





Hey fire -

Quick question. I've been doing some initial reading on FHA loans and hope you can verify my learning. From what I've seen, FHA loans do not use typicall PMI insurance. They build their own insurance into the loan (I think it said 0.5%/yr) until you reach certain equity levels (depending on the loan type). Is this correct? Do you know when you see a loan rate for FHA, does it automatically have that built in or is it added on later. (Example: I saw an FHA rate of 6.5% 30-yr 0pt. loan. Is that rate including the insurance or would the effective rate really be 7% when adding in the insurance?)

----------------

My mortgage broker said that yes, we would have to pay PMI on the FHA loan - that's what started us down the road of looking at an 80/15/5.....so we could avoid PMI.

When we looked into this a month ago, the 6% applied on the loan amount.....so if you were buying a $100K house, you would put down $3K and finance the remaining $97K at 6%. The insurance isn't financed; it's additional, I believe.

 

[fire&ice]

BTW, 6 1/2% sounds high. On the zero closing loans here the money costs only 5.87 w/ no points.

 

[wonka27]

Yeah, it does seem a little high. That is why I asked about their form of PMI insurance. I thought maybe it was rolled into the effective rate. And I'm not sure what conditions that rate is for. Certain credit ratings and other items can make the FHA rate higher for a person. I guess when the time comes I'd just have to ask about it and see how it fits into the game plan.

 

[fire&ice]

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On 9/12/2004 11:08:54 PM wonka27 wrote:

Yeah, it does seem a little high. That is why I asked about their form of PMI insurance. I thought maybe it was rolled into the effective rate. And I'm not sure what conditions that rate is for. Certain credit ratings and other items can make the FHA rate higher for a person. I guess when the time comes I'd just have to ask about it and see how it fits into the game plan.----------------

Again, maybe old news - but another reason why FHA was so attractive to us was that the interest rates were a tad lower than conventional.

 

[wonka27]

Really?

If the FHA rates are lower, why wouldn't everyone who is under their threshold be taking the loan out???

 

[fire&ice]

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On 9/13/2004 12:52:11 PM wonka27 wrote:

Really?

If the FHA rates are lower, why wouldn't everyone who is under their threshold be taking the loan out???----------------

Not sure if that is still the case. This was back in the 80's. But, if interest rates are competitive or an edge, many homes don't qualify. The house price has to be under a certain amount. And, it's restrictive (perhaps in income as well). Way back when

the appraisal (which is very strict) included a condition report. Many came back w/ having to replace the roof, etc for the loan to proceed. Also, there exists much more creative financing now.

 

[aljdewey]

When I talked to my mortgage broker a month ago, the FHA rate was 5.875....and you'd have to pay PMI if down was less than 20% (only has to be 3% down).

We could get that same interest rate on the primary mortgage if we went with the 80/15/5 program - we were going to get 5.875 on the 80% first mortgage, and 7.625 on the 15% second mortgage....BUT *no* PMI tacked on.