Thursday, June 28, 2012


I had a few people ask me why we wanted to build instead of buy an older house and fix it up.  In our house we recently sold, we actually did a ton of remodel work. We added a whole dining nook, we added all new hardwoods and we built a bathroom from scratch.

And it was a lot of work and very stressful. Because we were living around the projects, it was very difficult to do them. J could only hammer when the girls were awake and with Brynn going to bed at 5:30, it was a short construction day. We were also only fixing surface things. In that house, which was built in 1930, we knew things could go badly at any moment. Bad as in a furnace breaking, a foundation or roof issue. Then you are throwing money at problems that don't make your house pretty like new hardwoods do.

When we first sold our house, we found a really charming farmhouse that was a shortsale. We were thisclose to putting an offer. Then we really thought about what that would look like day to day. It would take forever and ever and cost endless money. And that would again only fixing up things to make the house look the way we wanted it to look. The bones of that house were old- from 1913. The chances of something major happening were high.

J and I have always wanted to build. I know that is common dream. I meet a lot of people who say "oh want to build too!" and I know many of them never will. When you get down to the nitty gritty, unless you are building a cookie cutter house by a builder, it is stressful and expensive and scary as hell.

There a million unknowns. There are a million things that could go wrong and there are so many little pieces that have to come together to make this thing work, especially when you are doing a custom build. We are about hmmmmm, 2% in and I am already laying awake at night thinking of tiny little details like utility closet placement.

So again..WHY?

1.  We are picky and we know what we want. Especially J. He is super visual and honestly it would be nice to not have to hear him complaining about our house :)

2. We have the time. J only works 8 days a month and I stay home with the girls, so we have time to manage details, schedules and such. Our lot is 5 minutes from our rental.

3. We are realistic. We are not expecting to build a 5,000 square foot house on a 300,000 budget.

4. We want to live in this house until we retire. We chose this location carefully. We know we will never leave Washington or this immediate area because trying to remove the grandchildren from the grandparents could cause some serious issues. I want my girls to live in one area for school. I want them to have strong community roots. If we buy a house built in 1950, that will be one old house by the time we retire.  This house will be like new for a long time.  And someday, I don't want a mortgage.

5. We know we are taking a risk. And we are scared but excited :)

I promise I will take pictures of the lot and post them soon!

Saturday, June 23, 2012

Construction Loans

So the construction loan financing begins!

I have called three banks, all on the recommendation of someone who has used them. They are all local banks- which I have heard time and time again is the best way to go!

Bank 1. This bank has an essentially 31 year loan. We would apply, get approved and close on the loan all before construction begins. For 12 months, the loan is interest only then it converts to a 30 year fixed. All of this at a rate of 4.5%. That rate is good historically but about 1% higher than the rate we could get buying a house today. If we have equity in the house when construction completes, we could refinance and get whatever current rates are however that would mean paying a whole new set of closing costs.  "People" are saying rates should stay this low for maybe the next year. This makes sense to me since we are really seeing the market pick up and a lot of that is due to low rates. I am not sure whether this being an election year will help us or hurt us, but I would think with the economy being the issue of the hour, keeping rates low for a while helps everyone. But having worked in the finance industry for years, I know nothing can be predicted.

The branch manager at this bank was wonderfully friendly and I really liked her (we spoke on the phone). Which is a plus since she would be potentially holding my hand a lot over the next year!

The thing I forgot to ask is if the loan has the ability to have interest reserves. Basically, interest reserve are tacked on to the loan amount so you can your interest only payments come out of this account instead of out of pocket every month. This would really help us since we have rent to pay and towards the end when we have drawn a lot on our loan, it would be like two full housing payments, eeek!

So I will hear back from her on the interest reserves on Monday.

Bank 2. This bank has a one close as well but the first part is an ARM at 6% and then converts to 30 year mortgage at the end of construction. I did not ask about interest reserves with this bank either, waiting to hear back. The benefit to this is that if rates are low when we finish construction, we would come out on top without paying closing costs twice. But if some crazy thing happens and rates go above 4.5%, the other loan might have been a better deal. The woman I spoke with was also a tad condescending, which was frustrating. This is when looking and sounding 20 instead of 27 will hurt me. For owner-builders, which we might do (that will be another post) closing costs would be more.

Bank 3. This bank has a one time close as well with a rate lock however, they have the option to float down if rates go lower... I have not talked to this bank in person, just looked online so I will be curious to learn more about their program.

Basically we are very lucky there are so many banks still doing construction loans in our area! When the economy tanked, many banks dropped that business line because properties were not appreciating thus making it a big risk for the bank to finance projects on depreciating land. From all the people I have talked to, the person handling your construction loan plays a big role in how positive the experience is. So far, I just love the woman from bank number 1. So helpful and friendly and her branch is close to our building site, but I am not sure if that type of loan is the best one for us.

Our lot closes on July 25th, so I hope to have met, in person with people from all these banks by Mid July since our project start goal is as soon after the lot closes as possible.

So much research, so little time!

Tuesday, June 19, 2012

First Underestimation

Building a house, this is bound to happen about 1,000 times. But this time, I did not really see it coming.  Part of our contingency on our offer is that we are able to get a septic approved on the lot. There was a 4 bedroom septic approved since 2011 but has since expired. So the agent quoted "$250" for a resubmission fee.

When I talked to the septic designer, he quoted $610 as the resubmission fee and then he said they would have to go out and re-test the soil and that was going to be $750. Hello $1360!

I am going to go out and take some photos of the lot the next sunny day.

Sunday, June 17, 2012

Our Lot

Since high school, J and I have had two dreams. Have kids and build a house. Every other decision we have made has revolved around those goals.

J and I started looking at lots in the area where we wanted to live almost a year ago. This has been our dream for so long but the dream has had to be continually redefined. Back in 2007, we thought we would be able to sell our house for a lot more than did. In fact, we had to dip into land funds just to get out of the house without owing the bank.

Initially, the dream was 5+ acres. That quickly dwindled down as prices rose and lot loans become harder to get. We had recently (start of 2012) decided that we would settle for 1 acre in a good area. We began actively touring with a real estate agent in February of 2012. Most of the lots we were able to afford were slightly underdeveloped and the land was completely raw- meaning no utilities were hooked up or anything.

We moved to the desired area in early May of this year to rent while we found land.

There was a 2.5 acre lot that I really liked and drove by often which was pretty far out of our price range. Then, on wednesday, the land was suddenly showing on my map of affordable land. The price had dropped 50K and we hurried out to see it.

We called the agent to ask a few questions he told us he could meet us out there Friday. In the meantime, he got an offer from a builder wanting to build a spec home on the property. So he told us we had one day to make up our minds. Eeek! The land itself has had some wetland issues in the past. Those have all been dealt with and the wetlands have been mapped and approved by the city- very important since tasks like that can take a long time and cost a lot of money.

There is also a driveway (crushed rock), water and power to the building site (also big headache reducers). A 4 bedroom septic plan had been approved but since expired so we are going to need to resubmit that (this also cuts cost significantly because the expensive parts have been done for us already).

The building site itself is half acre- which is a good size. We want to build a smallish house, but I do want to have space for a yard.

So Saturday night, our offer was accepted and we have 30 days to submit the septic, double check the permits and make sure as best we can that the land is build-able and right for our needs.

Low interests rates are really what is making all of this possible and I am so excited/SUPER nervous to take the first steps on this long awaited dream.