We want to build a house! Now what?
Thinking about building a house? Here are my recommendations on how best to get started.
Look at your finances!
The first step is to look at your finances. Do you have enough money for a down payment on a new construction loan? Most new construction loans (at least in Ohio) require a 10-11% minimum for a new construction loan.
This could come from 3 places:
Savings: You have 10-11% of the cost of the total build saved in your savings account ready to be put down as a down payment on the new construction loan. The hardest option by far.
By selling your current home. You have to sell the home you are living in currently so you can apply the equity from your home to use as your down payment. Equity is the profit you will make on the home after you have paid off what you owe to your mortgage lender. For example, if your house is sold for $225,000 and you still owe $150,000, you will make a profit of approximately $75,000 that could be used towards the down payment on a new construction loan. This is only possible if you can find somewhere that will let you rent month to month, or have a family member you could live with until your home is complete. This is the best choice financially but also the hardest on your family emotionally because this means moving twice.
Home equity line of credit. This is when you take out a line of credit based on the equity you currently have in your home. This is a nice option because you only pay interest on the amount you borrow. Most banks who do HELOC will let you borrow up to 85% of the value of your home minus what you owe. An appraiser will come to your current home and tell the bank what it is worth currently. The bank then calculates your equity based on how much you still owe. Building off the example from the last bullet point, If you have a home worth $225,000; 85% of $225,000 is about $191,000. You still owe $150,000 so subtract $150,000 from $191,000 and you can recieve a HELOC for around $41,000. You can then use that as your down payment on your new construction loan, continue to live in your current house, and only pay the interest on what you borrow which is a few hundred dollars each month. Keep in mind, you will have to pay this back once you sell the house because that is how a home equity line of credit works. Say you sell the house for $225,000. You must pay your mortgage lender the $150,000 you still owed on the home but then you must also pay the $41,000 you will owe on your home equity line of credit. You should still make a profit after paying off both loans. It only takes about 1 month to open a line of credit and it is available immediately. This is a nice option if you own a home, have equity and don't want to move twice.
Once you have looked at your finances, you should have a better understanding of if the time is right to move forward with building or if you should wait and continue to save money. This doesn't mean you can't explore builders while you are considering selling your current home or applying to open a HELOC. Which brings me to step number 2: Find the right builder and land. To be continued in my next post.
Thanks for reading!
Amanda
Our Story and how we came to the conclusion to build our dream home!
My name is Amanda. I started an Instagram page to show my friends and family the updates on our new build. Since starting the page, I realized how much I enjoy sharing my experiences because they actually have been helping people! I thought I would start a blog and introduce myself by telling you a little bit about our story and how we ended up building our forever home.
I am a part time pediatric nurse and a full-time Christian momma and wife. I met my husand Drew when we were 24 years old in 2014 through CrossFit and Facebook. We got engaged after 1 year of dating and then eloped 2 month later. Yes that's right, we eloped and haven't regretted it one day since! Haha. That was the first step in building our beautiful life together. We were going to have to pay for our wedding completely by ourselves so we quickly realized that was a lot of money that wasn't going to be beneficial for our future. We kept our wedding day about dedicating our lives to each other and used the money for the wedding to purchase of our first home. We bought our current house in October 2016. We got our 2 dogs shortly after. Our Goldendoodles name is Remi (short for Remington) and our Aussiedoodle is named Raven. They don't have anything to do with building our forever home but they are our babies so I think they deserve a spot in this story.
Drew and I did not have any debt other than our home and our cars. I was working full-time as a pediatric nurse and luckily didn't have to take out any student loans (thanks Mom <3) Drew also went to college (a lot) but was lucky and went mainly on scholarships so he also didn't have any debt. At the time, he was working for a physical therapy supply company. It didn't pay great but it was stability. In early 2017, Drew took a job as a salesman for a company that was "up and coming." He spent the entire year traveling. That was a hard year for us. In November 2017, Drew unexpectedly lost that job. We were able to survive on my salary alone but also completely depleted our savings to make ends meet. Drew spent the entire winter unemployed and unable to find a job.
We were extremely discouraged during that time. Looking back now, we are so thankful for the hardship of him losing his job. It was around that same time that we were invited to our CrossFit gym's church on Sundays. We started to learn all about Jesus. Neither of us had grown up having a relationship with Him. I would say that was the real turning point for us. We pursued God more and more and prayed... A LOT! Our prayers were answered when Drew was offered a job in March 2018 with a roofing company as a project manager. Needless to say, Drew had finally found his calling in life. He finally found something he loves doing that also financially provided for our family and our future.
It was around then that we decided to get really serious about our finances. We welcomed our daughter into the world in May 2019, our sweet girl named Maren Grace (after the country singer Maren Morris). She gave us a whole new meaning to life which really just fueled the fire. Drew was killing it at work and I was still working full-time so we started chipping away at our bills. We met with a friend and her husband (Hannah & Tim forever grateful for you both) and Tim really helped us get it together. We followed a "Dave Ramsey-ish) approach to financial freedom, but didn't follow it to a T. Within a few short months we were able to pay off Drew's truck and save a 12 month emergency fund and I was able to go down to part time.
One day I came home from work and decided I wanted to make over our kitchen cabinets. They were an ugly dark reddish brown color and I spent all weekend painting them white. I know what you're thinking right now... What does this have to do with building a house. Stay with me I swear there's a point to this. We had no intentions of building a house at the time. After the cabinets were done, we realized our floors looked terrible, so we replaced them. Then the countertops looks terrible, so we replaced them. Then we realized our walls needed painted, so we painted them. Then I decided we needed to ship lap our living room. By the time it was all said and done, we completely renovated our first floor. It felt like a brand new house!
AND THAT'S WHEN DREW DECIDED HE WANTED TO BUILD A HOUSE... Notice I said Drew, not we... haha. You can tell who got their way. lol
My next post will be about how to get started once you decide you want to build a house. Thanks so much for reading!
