I asked about this before...but we got more information and now...I wonder..
After talking to our banker we decided we didn't want a "jumbo" loan. Too much hassle. That means we only take out the max conventional which is 417, plus whatever we put down. Right now that look like no more than 90k. putting us a 507k
To stay within this budget, my fiancee and I decided we would only "finish" the first floor which is 2900sqft. This means every piece that we want and the master bathroom an half bathroom would be as we wish.(exception of library/office and formal dining room)
And since we don't have kids, we would paint, put up better trim and add little touches, upgrade certain things to the second floor and downstairs library and formal dining room later throughout the first year so using cash. Basically keep it as enough for occupancy when its built.
Minimum to make it livable (with the correct flooring) its 1400 sqft.
Is this feasible? on a 500k budget? I'm in Michigan.
This budget doesn't include the land or stuff. Just the actual build. I know they say its cheaper to do it all at once, but we really don't want to go into jumbo loans and we are in no rush. We could wait another year and save up more for down payment, but why keep renting when we could put that money into our own house.
I'm asking here because I don't want to embarrass myself when bringing this up to our builder.
the builder is the guy you should bounce this off of, because of several things...
(1) it tells him this is a rock-hard budget, and that he has to isolate a contingency fund himself from this hard rock budget. (stuff) always happens in construction, from weather delays to unobtanium products to charlie-fox subcontractors whose work has to be redone.
(2) it also tells him that he's going to have to be creative in his use of materials to make the budget. no ipay and sub-zero forrrrr YOU, but there are plenty of good options that don't look like you shop the dump.
last thing you all want is to build a $700,000 house and run clean out at $470,000 before the roof is on. misunderstandings are easy when he's the pro and you are not.
(3) there is, of course, the background question of whether you are biting off more than you can handle. that discussion is best had between you and the contractor.
sig: if this is a new economy, how come they still want my old-fashioned money?
I'm a bit confused.
I assume you're referring to the choice of a jumbo vs. conventional loan only in the sense of your permanent financing, which would replace the construction financing? Is your construction financing sufficient to get you to a point of completion that you can get a permanent loan?
I think the issues of what you'll need to do to get a certificate of occupancy and a permanent loan are still major ones which you should discuss with your builder and the community authorities. And of course these issues will drive the level of construction financing you need.
If your minimum livable space is 1400 sq. ft. but your entire first floor will be 2900 sq. ft., and there's a minimally unifinshed second floor, this leaves a lot of unfinished space. I would think that the permanent financing lender would be concerned about this issue. That lender is going to want the collateral to be worth its investment, and a less than half finished house raises some questions about that evaluation.
But there are still the issues of what your community government's standards of completion are and what you need to do to meet them.
If you haven't yet spoken with your community's architectural or building department, it might be a good starting point so you can work backward from there to ensure that you can actually get a C/O to live in the house.
This is a major consideration which should drive other factors like how much you want to finish.
If you're asking whether 1400 sq. ft. can be "finished" on a 500K budget, this is really a question for your builder.
And wherever you are in Michigan makes a difference. If you're in SW Oakland County, for example, your land costs will be more than in SE Oakland. If you're building in Wayne County, that's a different story entirely, as would be building in Livingston or Washtenaw County.
You wrote that your budget excludes land "and stuff". How are you planning to finance the purchase of the land?This message has been edited. Last edited by: GardenSprite,
We're paying cash for the land which is why its not an issue and also why we only have the 90k to put down.The ground clearing guy gave us an estimate for 7k to clear 40k feet, as we know him, so its not an issue.
The 2900 sq ft ground floor is what we want "finished" to exactly how we want with only the upstairs 1400 finished to the point needed to COO. That's well over half the sq ft in perfect condition.
The builder who we are sending the plans over to said he will take a look to see if our estimate is reasonable. I just want an idea.
We are in central oakland county..
Thanks for the explanations. I wasn't intending to pry on the issue of the land; just wanted to be sure it had been factored into the financial calculations.
Guess I misunderstood what the finishing intentions were. I thought you only planning to finish 1400 square feet of the first floor.
If you're where I think you are, I pass your area regularly. Don't worry - I'm not a stalker! I sometimes take that route through some of the communities in central Oakland County because it's less traffic and more scenic. This is the orange and white barrel season so routes have to change to avoid the delays.
No problem I'm sure you aren't stalking us.
Yeah we are really trying to determine if 90k is enough of a down payment for what we want or if we need to just go ahead and wait another year. Its a tough decision as we really don't want to spend more money on renting.
I am concerned as to what our budget will be. I honestly see no reason to go all out upstairs. Its two people right now, and we will have time to figure out what we like up there before we get pregnant (I get pregnant).
We know exactly how we want our kitchen, living room, master bed and bath...but the other rooms we haven't given much thought to as of now and a whiteboard seems the best option considering our financial decision to stay away from jumbo loans.
I hear we're back to the 50s, in that you need 20% down just about anyplace, or they don't process your application any further than the roundfile. so 5 x $90,000 is $450,000 and that's your top for building, permitting, platting, permanent title.
that should also include appliances and furniture, because it sounds like that runs you out of credit which you can pay on monthly.
you can do two floors and an unfinished basement around here with a 50 mile commute to the twin cities, but it's not going to be a magazine-decor home, it's builder-grade. as always, the biggest cost is labor. next is materials. next is covering contingencies IMPHO, since you already have the land blocked out.
and you don't want to be the "cheapest" house in the neighborhood, or the loan value is not fully backed up.
you're right to stay out of jumbo territory, you get penalized in all directions... interest, property tax, elbow room for lifestyle, etc. another case of "if you have to ask, you can't afford it."
good luck on the house of your dreams.
sig: if this is a new economy, how come they still want my old-fashioned money?
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