|
| Author |
Message |
kurtis
Member
|
# Posted: 5 Apr 2013 06:22pm
Reply
Hey guys,
It's been a while since I've been around. My apologies for only coming when I have something to ask. Hopefully I can help contribute every once in a while 
I'm speaking with a mortgage officer this Monday. I don't know how it will go but I figured I'd do a little bit of research ahead of time.
Today, I met with a realtor who is in some way affiliated with my credit union. I told her I'd like to buy land out in the country but have heard that you need to build immediately or else the bank won't finance it. She's not a mortgage officer but she was fairly certain (and knows people who've done this) that I can buy the land and sit on it for a few years before building. Whether this is true or not, I have yet to verify.
I did some craigslist searching. Previously I was looking at dirt-cheap properties in the hopes I could actually afford to pay cash since I'm self-employed and don't really make a ton of money. I'm leery of moving to extremely rural areas because of my son's education. I started looking a bit "closer to home" and found some decent building lot properties (with acreage) not too far from my locality which might be within budget.
Now, for my the information I don't have:
In these cases, are there usually any requirements on the homes being built when you purchase land with a loan from the bank? For example, would a licensed General Contractor have to be responsible for the construction of the home? Do people typically have to include the price of the construction of the home when they apply for the loan?
I'd like to build the actual house as "cheaply" (monetary) as possible. Preferably, if I do have to let a General Contractor lead the work, it'd be ideal if they could just put up a skeleton and let me handle all of the finish work. I really don't mind getting my hands dirty. Also, I'm thinking it would be very helpful to get one of those USDA Blueprints to avoid the extra costs of an architect, engineer, etc.
What are your thoughts on this approach? Good idea? Bad idea? Any other suggestions on a potentially better option for achieving my goal?
I know this isn't exactly the "build an amazing cabin by hand" project that so many of you have been fortunate enough to do but it's the best route I have in getting my son out of the city and owning a property that I can enjoy.
|
|
ICC
Member
|
# Posted: 5 Apr 2013 06:47pm
Reply
When you get a bank or mortgage lender of some type involved they are going to have lots of rules. You can't blame them as it is their money they are loaning. So my best guess is they will insist on the project being built by a licensed contractor. You might be able to work with the GC if that suits him. The local zoning and building department will also have a say in the time frame for completion.
Best answers are going to come from the local lenders and the local zoning and building officials. Some areas have lax enforcement on the zoning and building permits, but that won't change the lenders position.
Banks will not likely loan money against any of those USDA plans you can find on the internet. All the ones I have state that they do not meet current building codes quite plainly.
Do not believe anything any real estate broker or agent says unless you see it in writing. Some agents have been known to gloss over things. Many are 100% reliable, I have happily dealt with some. But others can talk a better story than what is real.
|
|
kurtis
Member
|
# Posted: 5 Apr 2013 06:54pm
Reply
Thanks for crashing my hopes and dreams haha, I'm just kidding. 
I think you're right, though. There will be a lot of variables. I suppose I'll just have to wait and see what the mortgage officer says before continuing.
I am definitely going to try to verify everything (and have it in writing) before I do purchase a piece of land, though. I don't really like surprises and am always leery about taking loans out; especially with stipulations.
If it weren't for the fact that houses with land are relatively too expensive in this area (Cost of Land + Cost to build < Cost of Used House with Land) and that lenders weren't so (understandably) cautious with their loans, I think this whole process would be a lot easier! Maybe my original idea of just paying cash and taking baby steps is the best route?
Regardless, thanks a lot for the feedback and information; especially concerning the USDA plans.
|
|
Alaskaman
Member
|
# Posted: 5 Apr 2013 07:21pm
Reply
I'm not in OH, but I bought my land 2.5 acres for $25,000 (owner finance from my brother) I have an $1,150.00 ballon payment every fall. Then built my cabin out of pocket while I lived in my camper. Perhaps you could find someone willing to carry some paper. If it was me I would stay far away from banks.
|
|
kurtis
Member
|
# Posted: 5 Apr 2013 08:38pm
Reply
Quoting: Alaskaman I'm not in OH, but I bought my land 2.5 acres for $25,000 (owner finance from my brother) I have an $1,150.00 ballon payment every fall. Then built my cabin out of pocket while I lived in my camper. Perhaps you could find someone willing to carry some paper. If it was me I would stay far away from banks.
Very cool! I've thought about that before. I figured it was a great way to enjoy the land while building and from the picture, it looks like it worked out great for you.
I agree about the banks. I just haven't had luck finding any long-term land contracts around here. Most people who do have property and are willing to deal in land contracts want a big chunk of change every month.
It's definitely an idea I'd entertain but I have my little boy and I'm afraid the schools (or even social services?) might catch wind of it and declare it unfit living conditions or something crazy. I'm not an expert at that kind of stuff; I figure if my child is clean, sheltered, fed, healthy, happy and what-not than it's none of their business but I've realized (after registering for Kindergarten) how much the school systems dive into your personal life. It's crazy!
I like your setup though. Thanks for sharing
|
|
Alaskaman
Member
|
# Posted: 5 Apr 2013 08:46pm
Reply
Yup you are right on there. The ex went back and got permission from the state to take my boys 800 miles away because apparently teaching them how to live debt free and build their own house is seen as unfit living conditions by the State of Alaska....... and my ex-wife. Which is obviously why she is my ex-wife.
|
|
PA_Bound
Member
|
# Posted: 5 Apr 2013 08:49pm
Reply
I looked into something similar to this about 10 years ago. Back then I was told that, to get a mortgage, there had to be a livable structure on the property already. If there wasn't, I would have to get a personal loan to purchase the land, then a construction loan to build the structure. After the structure was built, I could then apply for the mortgage and pay off the other loans.
There were a couple problems with this. Getting a large enough personal loan (to buy the land) is not easy. They would only loan a small amount based on my signature, and would not use the land as colateral to secure the loan so I would have had to put up other assets. And while I could have gotten construction loans, there were rules that had to be followed so the bank was sure the value of the completed construction exceeded the amount of the loan. The other problem with these loans is the interest rates are higher, and the interest paid could not be written off on my taxes like a mortgage could.
Maybe your experiences on Monday will be different- I hope they are. If you don't have the cash, or a lot cheap enough to buy on a signature loan, then finding a land-owner willing to hold the note on the land as you make payments is the "hot ticket". After that... I think Alaskaman has the right idea about how to build to avoid the banks.
|
|
kurtis
Member
|
# Posted: 5 Apr 2013 09:25pm
Reply
Quoting: Alaskaman Yup you are right on there. The ex went back and got permission from the state to take my boys 800 miles away because apparently teaching them how to live debt free and build their own house is seen as unfit living conditions by the State of Alaska....... and my ex-wife. Which is obviously why she is my ex-wife.
That's horrible. I honestly think that's exactly what kids need to be taught these days. I guess my generation and the previous few came out all right with the way our culture is now (debt and consumer mindset) but I don't feel like it can last forever. These are skills I want to learn and, like you, think they are invaluable.
I'm sorry to hear about your ex-wife taking the children away too. That's horrible! Especially 800 miles. I'm a little concerned about that too hence the reason I'm trying to do things the 'legal' way.
Quoting: PA_Bound There were a couple problems with this. Getting a large enough personal loan (to buy the land) is not easy. They would only loan a small amount based on my signature, and would not use the land as colateral to secure the loan so I would have had to put up other assets. And while I could have gotten construction loans, there were rules that had to be followed so the bank was sure the value of the completed construction exceeded the amount of the loan. The other problem with these loans is the interest rates are higher, and the interest paid could not be written off on my taxes like a mortgage could.
That's actually the initial steps I took in the latest try at seeing if I can purchase some land. I called my Credit Union and told them I wanted to get a loan for some land. The lady tried to tell me to talk to the mortgage department but I assumed mortgages wouldn't cover undeveloped land. I asked for some information about a personal loan. She told me that they max out at $20,000 (even that is based upon credit score and what-not), run at 17%+ interest, and must be repaid in 60 months. That was the end of that pursuit.
Quoting: PA_Bound Maybe your experiences on Monday will be different- I hope they are. If you don't have the cash, or a lot cheap enough to buy on a signature loan, then finding a land-owner willing to hold the note on the land as you make payments is the "hot ticket". After that... I think Alaskaman has the right idea about how to build to avoid the banks.
Thanks! I'm hoping so too.
I'm a little confused, what do you mean by a land-owner willing to hold the note on the land? Would that basically be a land-contract? Is that different than carrying paper? I'm just trying to make sure I'm not missing any options.
|
|
|
ICC
Member
|
# Posted: 5 Apr 2013 09:59pm
Reply
I didn't mean to dash any dreams, just wanted to inject a dose of reality.
Loans for vacant land will likely require 40 to 50% down.
A construction loan can be difficult to impossible for a landowner with no proven track record of building to obtain at any cost. That's where an established GC comes in; you are buying his expertise not only to build but to obtain financing. There's a recent thread here that illustrates why lenders will be, should be, cautious about construction loans. How not to build a cabin or something like that.
I have no problem with mortgages or loans if and when they are used responsibly. I have had many over the years, some to finance property that in turn was rented to make an income stream that paid for the mortgage. Some with banks and some with the private seller. FWIW, I won't loan to relatives or friends any more. It's easier to stay on good terms with friends and relatives when they do not owe you money. That side has not always been bad but the bad experiences are difficult to forget.
There are a whole lot of details that need to be covered as well. Not every piece of vacant land is buildable, or buildable at low cost. Soil with high clay content can be extremely difficult to build a solid foundation upon. Land with slopes sometimes require a major foundation investment to avoid problems. I know of a very nice piece of land in CO that is available. Every spring it moves a little further downhill.
Is there a recent and valid survey? Is there legal access to the land? You'd be surprised that there are parcels for sale that are landlocked; surrounded by other private land and without any legal right of way for access. And on the other side of that question, do any surrounding properties have an easement giving then access across the land for sale?
Is there already a road or driveway; does it meet current zoning laws such as for width and a turn around area for emergency vehicles (fire, ambulance)?
Power utility? Water and sewer or is a well viable and will the land pass for a septic permit and at what cost?
What zoning restrictions are in place? Any covenants that restrict size or whatever? HOA?
Is the land in a designated flood plain? How many permits would be required to do the improvements and build a dwelling, and at what cost.
IMO, buying vacant land takes more work and effort than buying an established home. But it can be very rewarding when all the bases are covered properly.
|
|
kurtis
Member
|
# Posted: 5 Apr 2013 10:33pm
Reply
haha no problem. That's why I came here and asked. I figured there's a lot of people who have already been through the ropes and might be able to share some insight or advice.
That is an excellent list of questions to address when looking at a property.
I suppose it wouldn't hurt to try and look at it from the bank's point of view; although their point of view costs a whole lot more than I'm sure most would like to pay. I'll have to search for some of those threads you mentioned, I'm sure there's a lot to learn.
As far as the 40% to 50% down; is that fairly typical? If so, I'm thinking it might be a good idea to just keep saving; but that's the cycle I'm trying to break. Every month I don't have a place of my own is another month I am helping pay someone else's mortgage.
Not to sound like a pessimist but I am starting to realize the whole "reap what you sew" and there are no shortcuts apply here more than I imagined. On the bright side, one day all of this hard work will pay off and it'll just be that much gratifying.
After some thought, I believe trying to pursue the "cheapest" route to this dream is a double-edged sword; trading irreplaceable time with what amounts to be a relatively small amount of financial savings. Time to work on a Plan B while I wait to hear from the mortgage officer
Thanks guys!
|
|
Grandma Off Grid
Member
|
# Posted: 6 Apr 2013 08:15am
Reply
hey kurtis, my friend lived in a converted school bus for 2 years in ohio. ex didn't like it but she had no issues. she and kids stayed at a campground.
she was homeschooling the 3 teens/pre teens, but then put them in small public school. again no issues.
they wanted to get land too, it was actually her BF (then later husband) living in bus with her and kids. and she was in the divorce process, ex dragged it out 5 years.
later they rented a farm house, but not due to legal stuff, just got too crowded for them in bus.
|
|
kurtis
Member
|
# Posted: 8 Apr 2013 07:33pm
Reply
Thanks for sharing your friends experience, grandma off grid. There might be hope after all
Just a quick update. I spoke with the mortgage officer. He said land is basically out of the question unless its a 'building lot'. I told him where I want to be monthly payments and down payment wise as well as my income. I think I'm sitting at about 40k potential which buys practically nothing Id pay 30 years to live in.
Now while I think that stinks, the good news is I'm financible haha. The rates looked great too. I'm going to try to look further out in Ohio again, like Vinton county, but I'm really worried about schools and Ohio + moving away from family makes the option of homeschooling and working fairly daunting.
Any suggestions with the new info?
|
|
kurtis
Member
|
# Posted: 12 Apr 2013 12:32pm
Reply
I found this:
http://columbus.craigslist.org/reo/3716604063.html
I haven't talked to the owner, yet. It's essentially 2.5 acres in Vinton Count (very rural) with a creek. They are only asking for $4,000 or $4,500 with a reasonable land contract.
Two things:
1. Does anyone who live in that area have an idea on why he might be selling it for so (relatively) cheap. I've heard/read that Vinton has a minimal 5 acre parcels unless it's road-side (or some other various requirements).
2. If anyone else is interested, go for it! I'm hesitant because I can't get out that far very often to really follow up with this deal.
|
|
kurtis
Member
|
# Posted: 12 Apr 2013 12:58pm
Reply
Another update:
I spoke with my mortgage officer again. Here's the deal:
I have approximately $50k in school loans. They are all set on an Income-Based Repayment Plan. At the moment, due to income, that amount is $0.00. I've estimated that it will be the same for next year as well.
Unfortunately, the bank doesn't care about that payment amount. The only thing they do is to calculate 2% of the total balance which puts me at approximately $1,000 per month. This completely destroyed my Debt-to-Income ratio since I had to use 2011 + 2012 average as my income.
I asked about FHA but he said it would have to be deferred for 12 months; unfortunately, since it's on this payment plan I cannot defer it.
Finally, I bluntly asked him if I can even get financed. He said "highly doubtful".
This is turning out to be a painful, but enlightening, experience. I wish I would have known this before I graduated; it would have been easier to buy a property then!
So, I'm looking for other options. I'll continue to save but this has really changed my perspective on the whole 'system'.
Rant ahead; feel free to ignore
------------------------------------------------------
I think if/when we do purchase a property, I'm going full-fledged independent as possible. Pay cash or barter for everything. Little-to-no grid tie. I understand the banks need to be careful with their money but I worked my @$$ off to finish school while raising my son (single father). I also started my own business so I can be at home and have a flexible schedule for him. I earn enough above the poverty line to not get any assistance (not that I want any; just making a point) but make so little that the prospect of paying off my school debt and paying off a home before I'm 60+ is not looking good. Sorry for the rant, I'm just feeling a little aggravated with the situation.
|
|
trollbridge
Member
|
# Posted: 12 Apr 2013 01:09pm
Reply
Hi Kurtis,
Sorry to hear about your frustrations! Allow yourself the opportunity to vent and then prepare to chin up and carry on You have achieved some admirable goals...with a "can do" attitude, you will achieve your dream of eventually owning a piece of land too! Keep plugging away and stay confident! Best of luck to you
|
|
kurtis
Member
|
# Posted: 12 Apr 2013 01:22pm
Reply
Thanks @trollbridge for the optimism! You're probably right, I'm sure something will work out. It's just a matter of time
|
|
Alaskaman
Member
|
# Posted: 12 Apr 2013 01:59pm
Reply
That's one of the reasons I left the northeast and came to Alaska. Land is affordable up here. The economy is good, pay is good and women like to snuggle in the winter.
|
|
trollbridge
Member
|
# Posted: 12 Apr 2013 04:17pm
Reply
You will get there one way or another
May I suggest that you not totally write off the smaller rural schools. There are many benefits being in a small school if the staff is good. Look into some of the schools yourself...it just takes a little time before you'll start to form an opinion.
Might I also suggest you do your homework BEFORE you buy a piece of land. Know the codes and what it takes to meet permit requirements. It is a lot to keep track of, but it will benefit you in the end. Just keep in mind every county is probably different. Take your time with this process-it took us a full year to decide on our land. We looked at it originally in July, but didn't buy until December. Before that we looked at A LOT of land! Know your goals, but display patience... it's the biggest lesson I've learned during our cabin adventure
|
|
kurtis
Member
|
# Posted: 15 Apr 2013 10:52am
Reply
Thanks guys for the inspiration. I'll keep on trucking and hopefully something good will come along.
I'm also going to reconsider the smaller rural schools. At first, I assumed they would be better. The only thing that threw me a curve ball is seeing the "scores" of the schools I was looking at. That's probably not a good representation of the 'education' anyways. I'm not a fan of standardized testing so I don't know why I really looked at the scores to begin with haha
|
|
TheCabinCalls
Member
|
# Posted: 15 Apr 2013 11:11am
Reply
Kurtis, keep going after it. I had the same dream. I thought it would never happen, because my dad had the same dream and although he did buy land, he never built. My wife and I were up against exactly what you are now and we prevailed. We couldn't get a construction loan, we couldn't do a land contract or get a loan for the land. We ended up using cash and a small equity line with the goal of paying it back in 6months to a year. After we paid it back we saved for a couple of years to start building. So be patient...if you stay committed it will work out!
That said I have a word of caution for those places you are looking at closer to home. Read and reRead the deed restrictions for these parcels. What we have a lot of is people dividing their land to off set higher costs and they put deed restrictions that are very strict. Some we saw: setbacks, 2000sft minimum, height, type of exterior and even type of framing. They need to sell their land for money, but they don't want anyone to bring down the values of their house that still sits on the original property.
Also if you do a land contract or any other cash deals. Pay a good title company to search out all details before you close the deal.
You CAN move too quickly...so just make sure you read the fine print. Seems like you are being careful, though.
|
|
trollbridge
Member
|
# Posted: 15 Apr 2013 03:31pm
Reply
Good advice TheCabinCalls!
How small are we talking for these rural schools?
Test scores are just one indication of how good a school is. In my opinion, schools teach a lot more than just text book materials. I would look for a strong sense of community. In many rural schools, this is one of their strengths. How do the staff and students treat each other? With kindness and respect? What about the students-how do they treat their classmates? We learn so many lessons at school that have nothing to do with test scores. I think that if a school has super test scores, but isn't focusing on the equally important "life" skills, then it is missing a very important opportunity to teach young children how to be good citizens. That's a shame. Students need to be engaged and stimulated and feel safe and valued to get the best education. Try to keep an open mind, and maybe it will open up a whole lot of other possibilities for you. Keep us posted
|
|
exsailor
Member
|
# Posted: 17 Apr 2013 10:01am
Reply
I believe Old Buddy lives in Vinton county and few others as well. It sounds like a nice area maybe a bit hilly. In fact you might want to make the land is flat enough to get to and build on in that area. Good luck on your land search.
|
|
Smawgunner
Member
|
# Posted: 25 Apr 2013 07:52pm
Reply
We just bought in athens county and went through Farm Credit. They want 20% down and want a commitment to build at some point. I've heard nothing but good things from the theohiooutdoors.com guys about them. They've been great to work with. Good luck!
|
|
|
