& Building Your Own Home: Yesterday
I heard that Fannie and Freddie Mac may be dissolved
over the next few years. It will inspire banks and mortgage
companies to make better loans, knowing they can't just
resell them to the government, but it will also mean
higher interest rates and more down-payment needed.
So, I thought I'd talk about the financing of building
your own house, particulary when you use straw bale.
have a mortage on my home and I was led to a mortgage
broker who knew which companies would lend on them.
The mortgage has switched hands several times now and
there is a good chance that the original mortgager is
no longer in business. I make payments to PNC mortgage.
I think the biggest issue to a lender is that you pass
all the inspections required in your area and get an
occupancy permit. That is the county or city's promise
that your home will last for the term of the loan.
often forget that we aren't just building for ourselves.
Even if we have enough cash to fund the construction,
we may be building for the person that buys the house
from us. I am already looking at retirement some day
and wondering if I want to stay out here in the desert
or possibly volunteer at National Parks and travel around.
So, I possibly would sell the house or pass it along
to one of my children.
mention the inspection process in the book and to summarize,
when I got my building permit from Pima County, I was
handed an inspection list of 23 inspections and a phone
number to call when I was ready for them. There was
no information on what they would be looking for during
each inspection and I completely blew it on one of the
foundation inspections. That's when I hired a consultant.
If you don't know construction, you really will need
someone who does to at least advise, guide you and recommend
sub-contractors or helpers when you need them. I paid
for some carpenters who did very little all day when
I wasn't watching them, too.
am very open about how I financed my construction in
the book also, but for those who have not read it, you
need to come up with enough money to get it built and
then once you have your final permit, you can get a
conventional mortgage. With a construction loan, you
often have a 6-month time limit and this house took
me 1.5 years to bare bones livable condition, working
very hard every evening, weekend and vacation. I do
know some people who convinced their bank that they
knew enough about building to be their own general contractor
and built with a construction loan, but that was in
the old days. I don't think you could do that now. As
a general rule, both of those will not let you do the
work - the contractor won't want the risk or won't want
to clean up after your mistakes and the bank won't trust
had some money from the sale of another house, but not
enough. I sold my car, got out the credit cards, borrowed
from my parents and my working son - everything. One
of the reasons I began writing was because I really
had no idea how much this would cost. If you hire a
general contractor and let him purchase all the materials,
then he will give you a total estimate. If you do this
on your own, nobody can estimate the cost. My greatest
savings was not in materials, but in labor and the only
way I could do the labor myself was to not have a bank
construction loan and a general contractor.
if you want to build your own home to save money, find
someone who will guide and consult with you for an hourly
fee. There are many builders out of work these days
or low on work, so it should be possible. Then, draw
up a small, simple house, no larger than what I built.
I'll discuss the passive solar design in the next blog.
Buy recycled doors and windows and whatever else you
can. I really recommend you read the book to fully understand
what I went through and how I saved money on materials.
Earthen plasters are far less expensive than stucco
and concrete, but you have to understand their limits.
I'll discuss those in future weeks, also. General contractors
get discounts on materials, so perhaps your builder/consultant
can help you there. If he will loan you tools, that
will save you a great deal of money, also. Every job
aspect needs a different tool. If you build something
that doesn't last, you have just wasted a bunch of money.
I looked at some of the build-your-own-home websites
out there and was not impressed. I think they are based
on you being your general contractor, but not really
based on you doing the work. General contractors get
discounts on materials and they have laborers on staff,
which saves them money - you wouldn't have either of
these. So, I don't buy it.
I think your best bet is to figure out a way to put
the minimum down on your land and save your cash for
building the house. I recommend finding a piece of land
with an old mobile home on it. Live in the home while
you build to save money. Try to build the simplest home
you can to get your occupancy permit - just do whatever
is the minimum necessary to live in it and then use
whatever spare cash you get each month to begin the
finishing touches. When you move in, you can sell that
old mobile home for a little extra cash, too. How great,
because then you don't pay 30 years of interest on all
that you don't borrow! If you have to borrow to get
the house built, then get a mortgage when you are done
and pay back your family and friends. =) Interestingly
enough, the least expensive construction materials are
often those that are best for the environment - recycled
and natura - and the most beautiful. Good luck!
it Simple - and be kind!