Ok, My husband and I have been trying to buy our first home. All the homes we choose, we cannot get financing for because they are too old. We can’t stand the new construction in our price range, very cheesy built and no yard. Do any of you know if first time homebuyers can get funding to build a home? Also is this a costlier way to go? My husband does electrical and all the cosmetic stuff, and can help in many other ways too. Is this feasable or are we dreaming?
Also some of the websites that sell blueprints give cost estimates for materials and labor, are those realistic? We want to build a modest Victorian….
Thanks for any advice you might provide,
Sarah
Replies
There are State and Federal programs for first-time homebuyers...I'm not sure how well these will mesh with your plans...or if they're even available in your unmentioned area. You should be able to find info through your local banker or loan officer. Their job is to lend money, they should be up on these things. Perhaps a local realtor might have info for you, too.
Building your own house? "Building" as in acting as contractor, or "building" as in swinging the hammer?
The more labor you plan on doing yourself, the less interesing you become to the bank. Whay? Risk. The bank knows that I can build you a house. Save bet, good loan, low risk. The bank figures it pretty likely that you can contract your own home. There will be problems, delays, budget overruns...it's slightly riskier to the bank to lend you money, but with qualified subs doing the work, the house wil get built and if you defualt, the bank will have a structure to sell. Now, if you plan on self-building, or swinging the hammers yourself...the bank will likely "laugh in your general direction." Big risk. Big chance of default. Low chance of successfully closing on the loan.
That said...several years back I was in your shoes. Moved to a new locale, knew no one. Had a little construction experience, but not enough income to afford what I wanted. I looked into self-building. Swinging the hammer myself. I couldnt even find a bank that said they made these types of loans, so I never even got the chance to be turned down. My realtor that was dragging me around town gave me the name of a mortgage broker, and...viola! for the price of a single point, I got a loan...from a bank that had already said "we don't make loans like that."
Built the house and ended up with a couple hundred grand in sweat equity. Yes, that point that I paid to the broker to secure the loan was worth it.
As far as house plans with realistic labor and materials costs...one set of numbers does not fit all locales. I'm running numbers (live in CT) in the vicinity of $220 a foot these days...my sister in KY just had an addition put on her house...for $70 a foot.
I'd venture that in Average-town, USA, a "modest" house would come in at $80-110 a foot. Land and utilities not included. A victorian with frilly detailing might bump up the numbers a bit.
If you can build your own home...in whatever way possible...you'll get a new home that is laid out as you desire. What can be better than that?
Best of luck!
I don't know reason that a mortgage company would not lend money on a house just because it is old. My guess is that there are some problems with the houses.
There are mortgage programs that are designed specifically for renovating older homes. They lend on the "fixed up value" and combine a mortgage with a home improvement loan.
You might check at the Hud site (www.hud.gov) and see if they explain this type of loan.
Also you might want find a large local mortgage broker and sit down with them in person and go over the different types of loans that they have available and see if any matches your needs.
As far as "building" it yourself here are a couple of companies that work with people in building their own homes. I know nothing about them other than seeing their ads and web pages.
http://www.presidenthomes.com/
http://www.ubuildit.com/
Sarah,
If you can stand to do the paperwork a Hud 203k might be the way to go. Here is a link.
http://www.hud.gov:80/offices/hsg/sfh/203k/203kabou.cfm
KK
Sarah,
There is just something about an old house. All those generations that came before you. Established neighborhoods, mature trees etc. The downside (if you call it that) is the repairs and renovations. It sounds like you know that already and are prepared for it. The only thing I can add about the financing is to try a local bank that knows the area homes and their potential. Good luck and keep us posted.
J.
Nothing wrong has been said yet .
The reason anolder home wont float is because they will be making you a 30 yr loan. A home for first time home buyers must pass FHA specs. Issues involved aare things like windows, insulation, structure , etc.
If a lisened contrator and what is known as a 210 builder which is certifcation with the goverment , sighns a contract to build you a home , that is security. Also a price that will give the loan officer a set amount that will not change. If you however contract your own house , you are not bonded , not insured , and have nothing to lose but a home you have nothing in , in the first place. That said ;
There are 210 builders doing homes in your range. Also look in the back of the paper . Auctions ran by the US marshal. Most of these homes passed an FHA inspection , and are being repoed . These are your best buys , and a way to gain equity with nothing down. After you fix up a house like that , you are ready to sell and move on to a better home with equity. I payed for my current home buying these and reselling them.
Tim Mooney
My suggestion to qualify for a mortgage is to save up more for a larger down payment.
You have a lot more leverage with the bank if you have 25% down instead of 10%. You'll also look a lot better to them if you're not carrying a lot of credit card debt or other consumer loans, like expensive vehicles.
I was going 70 miles an hour and got stopped by a cop who said, "Do you know the speed limit is 55 miles per hour?"" ""Yes, officer, but I wasn't going to be out that long..."
You'll also look a lot better to them if you're not carrying a lot of credit card debt or other consumer loans, like expensive vehicles.
I might also add that the credit limit on each card is as good as debt, whether or not you've charged anything. Cancel all but a couple of cards, including store cards, and lower the limits on the remaining to the very minimum you need. If you add up the credit limits on all cards in your wallet, and you'd be surprised how much it comes to, that's what the bank sees and treats just like actual debt, presumably since you can pick up the phone and load them up at any time after applying for the mortgage.
Be seeing you...
Sarah...I'm just "finishing" my 2800 sq ft gamrel roof "house". I have swung the hammer....a million times or so. Me building, and I am most certainly not a builder (astronomer by day, builder by night (unless I go to the telescope, then it switches! LOL))
Anyways, no bank would talk to me. I only approached about 4, but they all said go away. So I opted to start building with the $20K or so I had and credit cards. Through a friend at work who knows a banker at a smaller local bank, I was able recently to get a construction loan to finish the house. I had about $55K on credit cards, and $20K into the building. Shell was up, windows in (or on site) wiring mostly done, plumbing mostly in, etc.
They actually never looked at the house. I qualified for the mortgage quite easily...even with the credit card debts (all from the house by the way).
It is EXTREMELY risky in that if I did not get a mortgage now, I'd not have more credit to continue....and the monthly minimums were adding up (about $600 or so probably). So, could have been bad.
I think all my ducks in a row, somewhat good organization, and working with a local bank made my project work.
Now, when I'm done, I'll have about $150K into 2800 sq.ft with oversized windows, nice corian and rustic pecan kitchen, ss appliances, t&g pine almost everywhere, 2.5 baths, radiant heat, beautiful woodstove and surround, big patio, balcony, etc. A nice place...for $53.57 a square foot! Now, over the past year, I have at least 2500 hours into it, on top of my fulltime careeer....so I have been sleeping less and at the house. Constantly. I enjoy this (usually) and have loved every step. BUT, it is not for most...and I would urge you to consider your "devotion" or "insanity" very carefully. I enjoy listening to the coyotes howl in the whee hours of the morning as I am pulling wires...expecting to sleep maybe 5 hours that night, again...Most think I'm nuts. I agree! But I did it, it is mine, my way, done "right", and rather nice...or will be. Just finished hanging the rock on the ceiling yesterday and now insulating the walls and getting ready for rock. Will be in before thanksgiving...regardless if I have to use the outdoor facilities! And I might be living there alone for awhile...LOL
Good luck!
I might also add that the credit limit on each card is as good as debt, whether or not you've charged anything. Cancel all but a couple of cards, including store cards, and lower the limits on the remaining to the very minimum you need. If you add up the credit limits on all cards in your wallet, and you'd be surprised how much it comes to, that's what the bank sees and treats just like actual debt, presumably since you can pick up the phone and load them up at any time after applying for the mortgage.
Strongly disagree on this one:
OPENING or CLOSING credit cards will affect your Fair-Issac credit scoring (most, but not all, use some sort of Fair, Issac & co. formula).
Two to Four Credit Cards is considered normal. Keep the balances BELOW 50% of the limit. Key is the ratio to your debt to limit. $5K debt on a $20K limit looks much better than having $4K on a $5K limit.
LATE PAYMENTS: Biggy. No late payments. Always pay those bills on time. Car, House, Credit Card.
Went through a divorce a few years ago, but kept a clean credit history. Makes life much easier dealing the loan.
Spotted a decent write up about how Fair Issac comes up with that magic scoring number: http://moneycentral.msn.com/articles/news/capitol/5505.asp
On the Fannie Mae & Freddie Mac, they have some great programs. One is a "rehab" which allows you to get the loan AND Improvement Loan based on final value after the work is done. Yes, you need a licensed contractor to do the work (as already pointed out). Only catch is the loan carries a 3% fee.
In the past you could get a mortgage, and a home improvement loan, then later combine them when you refinance. Freddie and Fannie are going to change after the first of the year, in a home improvement loan will be considered a "cash out" and not eligible to refinance.
It is also very important to be "pre-approved" for that loan, talk to your mortgage broker, get everything setup first... then go looking. Simple, as a Seller, if I have someone "pre-approved" for a conventional loan, much more of a sure deal. If "pre-qualified" and a FHA -- it means they may or may not be able to buy, so I'll ask a larger non-refundable deposit. Also for FHA means more closing cost for the seller, and I have to get all those window screens back in place before it is appraised!
Good luck on the house hunting!
Tom
First, have you been pre-approved for a loan amount? This is not something to be taken lightly because each time a credit check is run on you it acts to lower your credit score, which can affect the amount or type of loan you can get. Ask people you know who just bought houses who they dealt with and did they like them. We ended up using a guy who had brokered mortgagaes for two different people who had recently bought. We ended up being pre-approved for about 175% of what we intended to spend. That in turn made our real estate agent more motivated because she knew we weren't operating at the end of our financial capacity, and that a deal might get dropped because we couldn't get the loan. So shop the brokers for closing costs, loan fees, etc, and then compare those good faith agreements to choose one for pre-approval. In our area, a realtor won't show you a house unless you have a letter.
If a bank isn't making a loan on a house because it is too old, then I suspect the house is either priced way above market or there are structural concerns, such as the house is a 100 years old and 90 years ago the whole area flooded. Banks in most cases look at numbers generated by appraisals and base their decisions on what they are likely to get stuck with. In my area, the prices on old houses is rising faster than new houses because they are now in a very short supply, so I'm not sure why you can't get financing. Are you in an area with a severe economic downturn, and therefore housing is still priced above where it may end up in a few years? You really didn't provide any specifics for people to make suggestions.
I agree with your choices. Nothing sexier than a 1900 house with 2000 infrastructure. As I told someone the other day, if I wanted new windows, I would have bought a new house. I wanted leaded glass throughout and that's what I gots.
All good advice so far.
I don't think anyone addressed the "planbook" approach, so I will.
Be very careful of these, especially with regard to pricing. Some of these so-called plans you can buy off the shelf are bad news, and a qualified builder can tell you for sure either way.
In any case, they are rarely a good deal. You're better off working with a skilled local designer and a reputable builder.
DRC
A huge ditto to what Dave said.
Those plan books are designed for one thing - To sell you plans. Once they have your money, they don't care if you can afford to build the house, or if the plan is screwed up, or is full of errors.
I genuinely HATE the plan book plans, and recommend that everyone avoid them.
There was a power outage at a department store yesterday. Twenty people were trapped on the escalators.
Sarah
If you want....Call my wife (see my website below for the phone number).
Shes been selling real estate for almost twenty years full time. I know she could answer al your questions and would be happy to.
Be well
Namaste
Andy
It's not who's right, it's who's left ~ http://CLIFFORDRENOVATIONS.COM
"Also some of the websites that sell blueprints give cost estimates for materials and labor, are those realistic? We want to build a modest Victorian...."
Do not accept cost estimates from anyone other than local contractors in the area you plan to build. I find even architects hired directly rarely have a thorough enough understanding of labor and materials costs to give you a realistic estimate.
J. D. Reynolds
Home Improvements
"DO IT RIGHT, DO IT ONCE"
modest victorian
Is that an oxymoron?
One mans modest is another's castle. Modest in SanFrancisco can be a mansion near Boss in the midwest.
I think some archys can have a vested interest in under estimating the true cost.
There is a post from a guy working in a planbook office over at the what to include on plans thread. He has a couple decent points to make. But overall, I would agree about the quality of these plans. The first thing to consider when designing is the family to live there and the site the house will be built on, in addition to the budget. None of these are considered in a generic plan.
But for a first timer with a modest budget, you could consider one of the packaged kits. Those companies will often finance the home to you for construction financing if you own the land and will erect the shell to dry in and let you finish the interior or contract it out. That way they have surity in a house they have confidencce in and not in a pile of warping lumber on site as with banks that get stuck by unprepared DIY builder/homeowners.Excellence is its own reward!
Ok, My husband and I have been trying to buy our first home. All the homes we choose, we cannot get financing for because they are too old.
Sarah,
Asked my DW about this. She is a senior mortgage underwriter, and basically there is NO reason why you can not get financing for an older home vs. a new one.
One problem she runs into is the appraisal must have three "comps" of like homes, in the same area, that have sold within so many months. This is to insure the bank is making a good investment, and the home can be saleable. If there are not "like homes" in the area, it is near impossible to get a appraisal. No comps, no appraisal.
There are also funny FHA rules like all windows needing window screens. For some Victorians it would be a crime to mess up that wood work to install a window screen, but FHA has the blanket rule "all windows much have screens". There are pages, and pages, of FHA requirements like that.
Of the comps, there was a really neat house. Sunken, earth beam construction. Only one like it, it was a custom built. No matter how well qualified the buyer was, no one would lend money on it... as there were no "comps" to be found. Ditto for a Victorian (neat house) in a run down area, mainly with bars and warehouses for three blocks around it. Just didn't fit the neighborhood, so no loan.
Oh of the sunken home... about 25 miles away, in a cluster, is about 250 of those homes. Super efficient, but there are enough of them that the appraiser has no problem getting comps.
So as long as that 100 year old home has neighbors like it, in good condition, and you go with a conventional loan... shouldn't be any different than qualifying for a "new" home.
Good Luck,
Tom
Oh yes, comps. My house is on 44 wooded acres on top of a hill. It is a gambrel roof "barn like" house. It is very open, mostly all wood, etc.
The appraiser of course had a hardtime finding comps. In the end, they said they couldn't find any houses like mine that sold within the past year on 44 acres of land. So, they valued my land at: $0.
Yep, 44 acres is worth nothing! I wish I could get the tax woman to agree to this. I paid $18,000 for the land.
In the end, the bank ended up giving me a "internal" mortgage, not one they would sell, so they didn't care about the appraisal issue. So I didn't care either.
But beware, those who like something a little different and off the beaten path, and god forbid you want to build yourself....beware the dreaded comp.
Modest Victorian is not an oxymoron...we built a simple farmhouse style, modeled after a house we lived in, that was built in the 1890's. It has some Victorian elements, but none ,I hope, of the pretensiousness...we had no trouble getting a loan ( I'm a carpenter and DW is a teacher, we're really raking it in)...keep on trying, and best of luck... It's okay, I can fix it!
Same prob uncle had selling his log home and acreage in piddlyville, NC.
"Can't get financing because they're too old"........BS.
Either on your part or the banks. Has nothing to do with age....all to do with equity and value. Guessing not on your part.
I'd suggest shopping around for a better lender. We bought our 1902 built house 5 yrs ago....and since I was self employeed and had already enrolled as a sutdent.....we listed my occupation as student......based all the salery requirements on one paycheck..and used both credit history's.
The age of the house had nothing to do with it.....as the house was in very good condition.....a 15 yr mortgage helpes too...as does +20% down.....
Step one would be find a great real estate agent to guide you thru the steps.
Step two would be cleaning up the credit report........
Step three....buy the house ya want.
Jeff.......Sometimes on the toll road of life.....a handful of change is good.......
In my opinion, mostly all good advice so far. Something that has not been mentioned is Owner financing. Greatly simplified, you make your payments to the seller, with interest of course, and you get to move in and fix whatever is required to make the house qualify for a conventional loan. The short story on loans is the seven variables.
1. Income
2. Credit
3. Down Payment
4. Loan to Value Ratio
5. Condition of Home
6. Interest Rates
7. Loan Fees
Given good answers on enough of the above, and the bankers can overlook some problems with others. I once bought a house that was appraised from the front yard, with a leaking roof, and rotten bathroom floor. 30% down, and great credit rating, and they really did not care about the house to much!! So work on the ones that you can control, and then make them give you a loan because it makes good sense for them to gamble on you. Also ask for a specific reason for loan denial from the loan officer, and ask lots of questions of what you could do to make the loan fly, almost always a way to close the deal!! Or suggest to the realtor to try for a seller finance for short term, while you fix the faults. If they want to sell, somebody is going to have to fix it sooner or later. Good luck, try to get the house you want!!!
Dan
I agree. I was shown a 110 y/o house here when we were looking. It went totally by my income to debt and the price of the house.
Want to hear something funny? The bank saying, "You're approved for a $362k loan" yadda yadda. The realestate lady took us to the neighborhood I am doing repairs in now, but we bought a small house elsewhere, less than 1/2 what they were saying. One time I just looked at her and said, "My DAD'S house isn't this expensive! I'd really like something simpler." She looked at me like I was nuts and then went to work on the wife. Wrong move, she didn't want to spend more than 100k. Glad we paid less. We'd have been on the street if we hadn't, after I lost my computer job!
Bottom line, I would have liked to have built my own, but I knew I didn't have time. The older but wonderfully huge homes were now bordering bad neighborhoods and I really didn't have that kind of maint time. If you really don't have the time it's a bad idea to get an older home or to try and build your own. I _will_ build the next house, but I am going to do it more or less on my own. (you know, the 5 year plan)
Similar story here....we "qualified" for way more than we figured we could cover monthly. Funny how that happens, huh?
We were actually looking for a cheaper apartment when the idea of buying hit us(I was getting ready to quit work and go back to school).....we stuck with a house that was less than our rent........and thru the wife's unemployment, a kid, and my own layoff/switch back to self employ.......it was a good decision.
Jeff.......Sometimes on the toll road of life.....a handful of change is good.......