Chase bank used to talk about construction loans on their website. Not any more. I called the 1-800 number to find out but got caught in the phone system with no option for my question. Then I called the local branch and the woman who answered the phone said they weren't offering construction loans for now. Next I searched the internet for some options and found a local bank that had information on their web page. I emailed for more information and got a quick response. Unfortunately, the information made me realise that a construction loan was probably not in my future. I mean, sure, it's an option, but an expensive one and it would tie me to my job for longer than I want.
Here's what he told me:
We do not have a 1-time close. We approve the customer for the Construction Loan and also get a pre-approval for the perm……but we have 2 closings.
We have a 12-month construction line. The perm rate is usually locked-in about 30 to 45 days before construction ends.
The rate for the Construction Line is 8.25%.
We have a 5-draw process (when the home is 20%, 40%, 60%, 80% and 100% completed). An inspection is completed before each draw.
Fees : bank fee of 1.75% of the line amount, appraisal fee is usually $350 - $500, ALTA title fees depend on the line amount, inspection fees are usually $75 - $100 each. Other small misc fees…..ie, credit reports, flood cert.
We look for the lesser of 85% of project cost (includes lot cost, home cost and soft costs), or 80% of appraisal LTV.
We also look for some customer available liquidity (cash) of about 10% of the line request. This is to cover any cost over-runs, and/or property depreciation over the 12 months of construction.
Whew...fees, fees, 8.25% interest, fees, and more fees. If I wanted to borrow $100k I would need $10k in the bank. And they require city water or a well so that would add $30k to the project or $15k if I split it with the neighbor.
What I would really like to do is find a contractor who will work with me in stages and be willing to use building materials from the Habitat Store and the local used building material store. Of course the main part of the house would have to be new materials like the concrete floor, framing, drywall, stucco, but the cabinets, appliances, doors, windows, sinks and faucets could be used.
From the rough estimate that one contractor gave me, I would have to work 3 more years and save $60k to start the project and then work another year while the house was being built to save another $20k to finish it up. Hmm...4 more years of full time work. But the real question is, would I be disciplined enough to continue saving money at my current rate if I wasn't pressured by a mortgage and the fear of losing my job and then losing my rental house? It also means 4 more years in this old mobile home. I think it is the best option if I want a real house. I'll continue to think about it and maybe I'll come up with a better plan.