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Answers (6)
- SoCal_Engr
- Contributions:5666
If you do decide to buy some land (nothing says you can't buy-and-hold vicce buy-and-build), be sure to get soils engineering done as part of the pre-purchase inspection. Just because land is level doesn't mean it's buildable.
Cheers, and good luck.
Cheers, and good luck.
- frankie999
- Contributions:3
Thanks very much for your insight. All good stuff to know. Yep $500k is the total budget. There are definitely some out-of-pocket expenses that I hadn't really accounted for (overruns).
We have been looking at land in and around Thousand Oaks and Topanga. I agree our budget sounds pretty low, but our plan was for a very modest home. We have seen land that we can afford, but are learning that some of this land is not exactly ideal for building (no utilities, crazy sloping hills, etc).
The more I look into this, the more I'm realizing that even $100k in savings is not enough. Good to get a reality check before we go too far down this path! :)
We have been looking at land in and around Thousand Oaks and Topanga. I agree our budget sounds pretty low, but our plan was for a very modest home. We have seen land that we can afford, but are learning that some of this land is not exactly ideal for building (no utilities, crazy sloping hills, etc).
The more I look into this, the more I'm realizing that even $100k in savings is not enough. Good to get a reality check before we go too far down this path! :)
- SoCal_Engr
- Contributions:5666
p.s. And now...the rest of the story.
When push-came-to-shove, all the trades wanted top-dollar for their effort. We had thought we could save some money by directly paying the trades, but...
Ended up selling the land (luckily, for a decent profit) and applying the proceeds plus reserves on new construction. Ended up with a larger house, as-good-or-better finish, in a much nicer neighborhood, for less money than it would have cost to finish the build. The person who bought the land/plans built/sold a few years later for more than we paid for our new house. And now? That house has dropped in value while ours has appeared to hold value, based primarily on location.
p.p.s. Where in LA? I'm thinking $500K sounds thin for a custom build. Also, is $500K your total budget (i.e., $400K borrowed, $100K cash, plus another $50K-$75K in reserves)?
When push-came-to-shove, all the trades wanted top-dollar for their effort. We had thought we could save some money by directly paying the trades, but...
Ended up selling the land (luckily, for a decent profit) and applying the proceeds plus reserves on new construction. Ended up with a larger house, as-good-or-better finish, in a much nicer neighborhood, for less money than it would have cost to finish the build. The person who bought the land/plans built/sold a few years later for more than we paid for our new house. And now? That house has dropped in value while ours has appeared to hold value, based primarily on location.
p.p.s. Where in LA? I'm thinking $500K sounds thin for a custom build. Also, is $500K your total budget (i.e., $400K borrowed, $100K cash, plus another $50K-$75K in reserves)?
- SoCal_Engr
- Contributions:5666
It's been a few years, but this may help you get started...
If you're really doing custom, there's going to be a gap between buying the land and starting construction. We bought the land (which had all utilities in place and street), then went through the design process with an architect, after which we were able to submit the design to the city for approvals and to start the permitting process.
Buying the land required 25% down. Hiring an architect and designing the house, as well as getting multiple copies of the plans for the bidding process, was all out-of-pocket.
We were set up to go with a construction-to-perm loan (the automatic conversion you referenced) through Chase. At the time, they had the best product, as well as fund control for the build process. The perm was to be an 80% 30yr fixed, and they included all equity in the land as part of the 20%. Also, the balance owed on the land would be rolled into the final permanent loan - subject to the 80% LTV limit. However, if you do the math you will realize you're going to need a decent reserve of cash to cover the 20% plus any overruns. Also, there are going to be costs that won't roll into the construction costs - and these are going to have to paid for out-of-pocket too.
So, 25% of purchase price for the land. 20% of construction costs, plus another 15%-20% in reserve for overruns or ???. With our construction-to-perm, the rate floated until we got into the last month-or-so (i.e., until we were fairly sure to get the occupancy permit).
If you're really doing custom, there's going to be a gap between buying the land and starting construction. We bought the land (which had all utilities in place and street), then went through the design process with an architect, after which we were able to submit the design to the city for approvals and to start the permitting process.
Buying the land required 25% down. Hiring an architect and designing the house, as well as getting multiple copies of the plans for the bidding process, was all out-of-pocket.
We were set up to go with a construction-to-perm loan (the automatic conversion you referenced) through Chase. At the time, they had the best product, as well as fund control for the build process. The perm was to be an 80% 30yr fixed, and they included all equity in the land as part of the 20%. Also, the balance owed on the land would be rolled into the final permanent loan - subject to the 80% LTV limit. However, if you do the math you will realize you're going to need a decent reserve of cash to cover the 20% plus any overruns. Also, there are going to be costs that won't roll into the construction costs - and these are going to have to paid for out-of-pocket too.
So, 25% of purchase price for the land. 20% of construction costs, plus another 15%-20% in reserve for overruns or ???. With our construction-to-perm, the rate floated until we got into the last month-or-so (i.e., until we were fairly sure to get the occupancy permit).
- frankie999
- Contributions:3
Thanks for the info :)
- Candace Camacho, "CandaceCamacho"
- Contributions:420
Hello Frankie999, Great question unfortunately Zillow Mortgage Marketplace doesn't have loan quotes for construction loans. I would recommend taking a look at our Home Improvement directory. This directory has some great resources. Take a look and someone in the directory can point you in the right direction. All you need to do is search by city, state, and zip code. Here is a link for more details http://www.zillow.com/directory/home-improvement/. Thanks, Candace Zillow Customer Support
Looking into construction loans in Southern California. What kind of options are available?
We don't own any land yet—I have heard that you can roll that purchase into the construction loan? Also, I have also heard that there are some loans that can automatically convert to a traditional mortgage when the build is complete?
Are there many lenders doing construction loans these days? What kind of loan options are out there? Thanks! :)
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