Buildnet

What's happening in the Housing Construction Industry these days? Not much! “One Time Close” Custom Perm Loans to the Rescue!

2011-06-04T11:57:00.000-07:00

So what does a homeowner seeking a custom home do these days? You get your own financing and let your financing bank manage the process for maximum results!

OTC or Custom Perm is two step loan consisting of construction (term) and permanent financing (perm) combined into one transaction.

This allows you to reduce your expenses to one set of costs usually associated with two closings. Until recently, it was more common for your builder to obtain construction or interim financing to build the home and then market it. Since so many builders found they could not sell their homes in a declining market, very few builders are proceeding using this model as banks have been forced to reorient how they handle construction projects.

What about Spec Loans?
Spec loans as they are called are pretty much dead in this market. In fact, many lenders who previously funded Spec or Construction loans have gotten out of the business altogether. Previously, when a home was complete, you, the home buyer, paid the builder with a permanent end loan. In this scenario, the price you paid included the builders profit and their cost of doing business while building your home.

While some builders will try to get this form of financing for 'their own home' banks have seen through this and are unlikely to fund a builder unless they are very solid financially indeed! Better for them and you to have a firm contract from the start and nail down the total project up front so there are no surprises. The great thing about building your own home is really having a hand in the design stage to final outcome and knowing the quality of construction from the ground up. Using the OTC (One Time Close) program, you first get qualified for financing for the total 'as built cost to build the home. We use your builder's budget to determine the final cost, including any acquisition land. The OTC loan is closed prior to the start of construction.

Usually, your permanent house payments will not begin until the construction is complete or you can choose to pay interest only during construction.

How does it work?
The loan is essentially a set aside of funds available while the house is being built. Your builder will receive construction draws during the process upon monthly inspection of what is completed. This helps you and your builder stay on task. As the construction draws are taken, the borrower will pay interest-only payments on these outstanding funds (or this interest can be funded into the loan).

Once the construction is complete and the loan is 100% funded, your permanent terms (which you established prior to starting) will modify so you have a traditional mortgage. OTC or Custom Perm can really save homeowner during the building process if it is managed correctly. This also saves your builder from having to qualify for the loan and extend their own credit. Most banks prefer this process as you, the homeowner are carrying the risk long term.

Where can you get an OTC?
Find a specialist OTC custom perm lender or mortgage banker who handles these products and knows what they are doing. Any construction lender worth their salt will have a dedicated and highly experienced underwriting and construction management team to make sure you get the house you paid for!

Enjoy the journey! loannetter

Grab a Bag of GREEN: Energy Tax Credits!

2010-10-05T14:27:00.000-07:00

Home Energy Tax Credits Pay Back 30% of Your Expense!

New higher Green Tax Credits apply to energy efficient improvements made to your home after February 17, 2009.

For example: If you invest $1,000 on better insulation or a high efficiency furnace for your home, this new law will return $300 in as a tax credit or 30% of what you spend. The total allowable is now $1,500, up from $500, under the old law. The products you install must be more energy efficient than what your are replacing or be certified. Check the product list at http://www.irs.gov . Look for the Energy Star label.

Alternative Energy Equipment Credit
For new alternative energy sources like geothermal heat pumps, solar energy generation or wind turbines, as long as these items are qualified as such and attached to you home, you can get the 30% tax credit with no dollar limit on these items.

Team up with an EEM = Energy Efficient Mortgage
EEM's have been around since the sixties. They let you borrow up to 5% (more than you would normally qualify for) to make energy efficient energy improvements to your new or existing home (county limits apply). By making these improvements before the end of 2010, you will also get the 30% tax Credit. Sweet!

How do you get an EEM?
A HUD certified FHA, VA, USDA or conventional lender can advise you on how to qualify and walk you through the steps to get your project approved and funded, whether a purchase or a refinance. Not all lenders offer EEM's. If you are buying a foreclosed or distressed property that needs some TLC (broken windows, missing furnace) this could be the ticket to getting your loan funded AND improving your home. I'd be happy to help!

Great Nesting Incentives!
With loan rates so low, and many builders low on work, now is the perfect time to go for a modest renovation or full scale addition and reap the benefit of tax credits. Energy improvments will also cut your energy bills by up to 50% while improving the comfort and health of your home for many years. Building materials and labor rates are very competitively priced and contractors are easier to schedule.
For many people who might want to 'move up' but can't sell their home in this market profitably, the addition of some great closet organizers, new flooring and better windows or kitchen appliances could make life a lot more comfortable while raising your home's value.

Think of it: you are improving your home value and employing local people which improves our tax base; while being credited back 30% of your energy improvements!

Plug and Drive Cars
If you purchase an Electric Vehicle during 2009-2011, and it has 4 wheels and weighs less than 14,000 pounds you could get a tax credit between $2,500 and $7,500, depending on the battery capacity/recharge factor. The new law applies to plug-in electric drive conversion kits. The credit is equal to 10 percent of the cost of converting your vehicle to a qualified electric plug in motor, up to $4,000.

Business Renewable Energy Grants
Business owners may apply for a grant or a renewable energy production tax credit for energy production facilties. If construction begins in 2009 or 2010, the grant can be claimed for energy investment credit property placed in service through 2016. You may be credited up to 30 % of your investment! The property must be placed in service before 2014 (2013 for wind facilities).
A rural homeowner with a year round stream, could, for example, build a micro hydro energy plant as a business and literally watch the money roll in by selling killowats back to your power company. How about a wind farm amongst your raspberries? Might scare off the crows!
For more on appliances, windows and lighting: EnergyStar Web Site

Happy Saving! loannetter
© copyright 2010 susan templeton loannetter

Existing Home Tax Credit: 30% of cost up to $1,500, Expires: December 31, 2010; Must be an existing home & your principal residence. New construction and rentals do not qualify.

Alternative Energy Tax Credit: 30% of cost with no upper limit, Expires: December 31, 2016; Existing homes & new construction qualify. Both principal residences and second homes qualify. Rentals do not qualify.
Source: IRS http://www.irs.gov/newsroom/article/0,,id=206875,00.html Source: http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm

It's EASY Going Green!

2009-09-21T20:21:00.000-07:00

Earlier this year Congress extended solar and alternative energy tax credits to take a bite out of the bill of upgrading your home energy systems. In addition, the EEM or Energy Efficient Mortgage is the new rage among borrowers needing up to 5% of your home's value to make energy efficient improvements..*

Since when is energy from the sun considered 'alternative'? Isn't the sun our main method of heating the earth? Even primitive adobe housebuilders and cave dwellers knew which way to face their walls for maximum solar gain.

The new 'alternative energy' credits mean that our federal government is providing a $2,000 credit paid to the builder on new homes whose space heating and cooling energy consumption is 50% below the annual consumption a standard home.

Ask your accountant to research your rebates! Heck one guy I know has an entirely 'alternative' net zero home and it's not the first one he has built so these are not new ideas folks. They are ideas whose time has come when we are looking around at the folly of ripping minerals out of the earth at great expense so we can send ships full of the stuff spilling their way to some refinery so another train or truck can haul it and at the end we get to pay three times what it actually cost to produce. Perhaps the new transparency is finally arriving just in time to start making sense. Like about the time we can't afford our gas bills this winter...that would be a good time. If you are like many of us seeing 50% higher energy costs, this tax credit is the perfect tipping point: Alternative thinkers are no longer the oddballs...they are the ones with real jobs climbing on roofs installing new solar collectors taking advantage of our new found enthusiasm for doing the right thing!

Energy Audits: If you plan to install a solar photo voltaic energy system, better windows, upgrades to insulation or other green features, you will need a home energy audit to verify the improvements are worth the effort. A HERS Audit is performed (approx $750 cost of which a portion is credited back in your EEM). Certified inspectors use techniques like infrared thermography and blower doors to test the energy efficiency of your home. These systems checks are part of LEED gold and BuiltGreen 4 star home certifications and are increasingly used by renovation specialists.

In some cases the product manufacturer can provide statistics of before and after savings to satisfy the underwriter's guidelines on yearly savings. Double or or triple pane windows and low-e glass are a no brainer in colder climates. One borrower installed a pellet stove to replace an older wood stove. The pellet stove manufacturer provided statistics comparing the savings of using a recycled easily sourced product and the heat btu gain plus dollar savings. Very convincing!

The bottom line is that your energy improvements must net dollar savings over time. Lenders appreciate that you will be paying less for energy going up in smoke, literally, and give you some credit toward a higher mortgage payment.

Who Can Help? Call your local Building Planning Department may refer professionals in the area. Contact your local chapter of American Institute of Architects or Building Designers. Seek out professionals in local building trades groups. City planners, universities and other business networks and sustainability groups may refer members who are experienced in these technologies. There's always Google!

Get a leg up on the renovation boom! Many folks are staying put and making lifestyle and health changes including improvements to their homes to allow aging in place...all good! Factoid: Most so called 'green loans' are a public relations ploy to get you in the door and the lender doesn't even know about EEM's and may not have a specialist construction department--borrower beware!

Get the Real Deal! Your green project needs to realize more than good intentions. Invest in a designer or architect and builder who are certified under a green program. The two most recognized programs are: Built Green, rated by stars and LEED rated as silver, gold or platinum.

Built Green is run by our local BIA chapter: http://www.biawc.com There are other programs in other regions.

LEED for Homes is managed by the US Green Building Council. http://www.usgbc.org this program was originally developed by commercial architects and has the most rigorous testing.

So remember the new mantra of our times: Green is Good!

Happy greening! Loannetter

© copyright 2009 susan templeton loannetter
*source http://www.hud.gov/offices/hsg/sfh/eem/energy-r.dfm

PERFECT Time to Build Your Home!

2009-05-29T15:44:00.001-07:00

What, are we crazy to suggest such a thing? Nope. Actually, like a good market contrarian, we can list a few very solid business reasons to build NOW.

1. Architects and Home Designers are either totally slammed working on major renovations for their top clients who may have decided to stay put or age in place... or extremely grateful for a nice plum ground up custom design to work on.
2. Builders are largely under-employed right now, so you will enjoy a choice of builders who are more willing negotiate your price and expect fantastic service.
3. Borrowers with high credit scores (720 or better) and sufficient assets to back up their project will have banks falling all over themselves to assist a custom project.
4. Builders can forget funding their own spec or custom homes (unless their client is taking on the financial risk) so you, Mr or Ms. Borrower will have all kinds of respect and control of your custom project coming your way.
5. Land values have plummeted due to the lack of developers able to fund construction projects so you will have more choice of lots going for rock bottom prices.
6. Materials costs are down for sheeting products, i.e., OSB board, plywood and other locally accessed products due to lesser demand.
7. Subcontractor labor costs are lower: $3.50 per square foot to frame a custom home now down from $6.50 psf last year (local source our region).
8. Green technologies are enjoying some very cool stimulus energy tax credits for solar and other alternative energy systems, so you can add some hot new upgrades to your home for great energy savings and better quality of life.
9. Energy efficient appliances are also enjoying local rebates from the appliance manufacturers as well as your local Public Utilities companies.
10. Better lighting design, including super efficient LED products are coming on the market that present huge energy and health benefits over current high efficiency models.

Whats not to like about all these advantages to building your home the way you want it for less $ per square foot? Just don't wait for the next wave of contrarians who can't find a nice spec home with all the perks of custom homes to get the message!

Happy custom building! Loannetter

© copyright 2009 susan templeton loannetter

Green is UnGreed!

2008-11-26T16:23:00.000-08:00

"The greed that led the world economy into crisis will not defeat our commitment to good work." Rick Fedrizzi

This quote came in a letter from the the CEO of the US Green Building Council, Rick Fedrizzi, offering the hope for homeowners and those in the green building industry who are concerned about the viability of our Green Movement during tough economic times. With everyone questioning the viability of the housing market in general, he reminds us that good is always valued. In fact, when you come right down to it, good equals value. We tend to choose better things that last longer and forego short term gratification when the dollars really matter.

He reminds us that we cannot wait for change to be effected by our legislators, our bankers, our employers or our mentors. It's up to us to create these positive changes for ourselves. By voting for officials we can support and then NOT just leaving it up to them but to get to work behind them and speak about, write about, blog about and take our need for positive change into the center of our real lives.

Change is hard. Not changing and waiting for things to get better is harder. We can create our own agenda, our own thinking, our own actions, as ultimately our abundance and our freedom!

Good ideas, and good trends eventually do take hold once proven. I posted a basic green blog on a real estate interactive site a while back and there were very few comments. Since then, I've helped initiate more discussion on these values in my circle of influence, attended several Green Living and Building Expos, taught a Green Mortgages workshop, participated in a Green Home Bus Tour, visited a couple of New Green Home and Renovation Open Houses, started foward planning for a Better Living (shades of green) seminar, and been party to a conversation on LEED and local Health Inititaves with my local officals and University. I have been speaking with more clients who are interested in building smaller better, greener homes. The conversation with banks (fewer, leaner) about ways to fund these projects is an open dialogue...we aren't there yet but with the 2009 Housing Bill I am pushing hard for updates to the traditional Energy Efficient Mortgage including air quality, more dollars and ways toincorporate the Alternative Energy Tax Credits. This trend is certainly catching fire and is NOT a trend we will see reversed any time soon (while there is breath in my body!)

Good news catches on for a reason: In recent months, I have witnessed a number of great new technologies and models coming to the fore. Given that the 2008 Congress Bailout Bill did include some tax credit extentions for solar and alternative energy --that very fact may help folks with their acceptance levels. Trends I have witnessed coming online locally include prefab modular home companies, new alternative energy products, new publications and networks supporting green concepts in various forms. The sheer enthusiasm for things green is contagious. It's gaining momentum. As better home and lifestyle trends become more the norm, these concepts are gaining acceptance with appraisers, realtors, underwriters, and lenders. Perhaps because green choices make both economic, social and environmental sense!

The upshot of all this for homeowners who are building or renovatiing and want to do a better job is more choice and more options with more willing participants. So remember the new mantra of our times: Green is Good!

Catch the wave! Loannetter

For more on green building http://www.usgbc.org

Renovators Celebrate Summer!

2008-06-18T16:26:00.000-07:00

RENOVATION SEASON IS HERE!

Summer FIXUP Season has arrived! Need a new roof, paint, landscaping, updated appliances or more? Many folks are staying put and fixing up rather than moving up these days-- in line with more sustainable values.

Look Before You Leap!
Many builders specialize in renovations so check around. Ask to see examples of their work and interview their clients...you want to know a contractor respects your family during the process! An architect or home designer can help you see your way through the planning phase and if needed, oversee the process for you. Some design centers offer a great range of one stop shopping for things like flooring and cabinetry and their sales staff can specify their products. However, this does steer you to a particular product range so you may benefit from the help of a consultant who will bring you samples for your specific needs.

Does Size Really Matter?
Before you blow up your house to enormous proportions ask yourself: how much space do you really need? Consider multiple use spaces, i.e., a family room with built in study zones. An extra closet with great shelving means your kids can put toys away rather than need that extra room to mess up. Better lighting or furniture is always a great way to freshen up your lifestyle.

As always: Get your building permits! Any renovation, whether you do it yourself or hire a contractor without a permit means the addition cannot be legally valued. The small addition of property taxes paid on your extra space or improvements will more than compensate for your home being sellable later on!

A Loan or a Line?
We offer a range or Equity loans and Lines for quick fixes. Renovation Loans work for 6 month terms on bigger projects. We offer all renovation programs including FHA Rehab loans which can help you buy and get rehabilitation funds at the same time.

Hint: Don't fall into the DIY trap, run up your Home Depot card, extend yourself with contractors all over town and kill your credit score!

Some lenders offer Bridge Loans for quick funds (3 months minimum) and high interest rates if you are into buying and flipping. Word of caution: beware the prepayment penalty...and have an exit strategy you can live with! The cost of doing business as a buy and sell renovator is worth finding a lender who is a) real and b) has funds to complete the contract. Most bridge funds to build or renovate include a decent funded contingency fee, no payments during the term, charge 5 points plus up front for their trouble AND (the best part) perform their obligations without quibbling.

Check out Dwell magazine this month: Renovate It! Modern Homes With Old Bones www.dwell.com

Contact Loannetter for your Free Construction Survival Kit. Our budget sheet can assist your Renovation or Custom Build project. A tight budget it the key to a happy end result for everyone concerned!

Stated Loans Still Around!
Great credit equals more trust and less documentation. With 740+ FICO scores we offer several stated income programs as long as you can verify assets necessary to close i.e., a few months cushion (2-6 months PMI depending on lender). Verified assets can be any form of liquid funds including your pension, 401K or other investments. Jumbo loans are still very affordable. Given recent rate hikes it pays more and more to guard your credit!

Click this Credit Link to order your lender report and analysis on our secure site or call and we can review your report over the phone. Don't underestimate the importance of your FICO score!

Happy Fixin! Loannetter

copyright 2008 susan templeton

Gliding Toward Green!

2007-12-02T20:04:00.000-08:00

Manufactured and Modular Homes have come long way, baby!

History Lesson
If you happened to grow up in a Mobile Home park in the early 50's it was probably a lot of fun compared to previous sub-standard housing offered to waged farm and factory workers. These mass produced affordable homes were a fact of life in many rural communities. They meant home ownership and a lot more room for your buck. People lived in closer proximity to each other and were less isolated. In many ways they created a sense of community that felt more like a village where people looked out for each other, actually knowing and caring for their children and elderly.

What we didn't know then and we do know now is that Mobile Homes, now kindly referred to as Manufactured Homes, were quickly constructed with price in mind. Naturally corners were cut on things like materials. You were lucky if your roof lasted ten years. The real problems that have been identified since those early years have more to do with safety and health matters arising from those cut corners.

Hint: You know you have a Manufactured or Mobile Home when you note a red license plate affixed to each section. These registration numbers are recorded with Housing and Urban Development. If the home has been re-sided (and tags were covered) another label should be located inside the electrical panel. Once a home has been installed onto a privately owned parcel (rather than a rented lot) the title may be 'eliminated' to the land. If your home turns up elsewhere than its original location you have a problem. The fact it was moved indicates to lenders an increased risk of damage or unknown structural issues and you will have a very hard time getting a mortgage.

You see, a metal box welded to a metal chassis that has been moved down a highway and installed on a questionable foundation has a habit over time of becoming 'wobbly'. In some areas where building codes were a tad lax or didn't exist, these homes were set up by retailers in a hurry--actually set on crates or wooden blocks on dirt without proper tie downs. You could understand why the resulting photos after hurricanes show littered mobile homes strewn around like doll houses. Unfortunately people were in those houses what the time. In our area, snow loads could cause a poorly tied down home to topple!

Over time leaking roofs allow water to seep into the walls, soaking into the drywall, insulation and floors; building up mold and mildew and creating air quality and resulting health problems. Not to mention dry rot, followed by opportunistic insects...you get my drift. Many early Mobile Homes used substandard plumbing and electrical systems. In fact, if you have such a home built prior to 1978 it is practically unfundable due to the facts of it's lessened value. Things like roofs and siding tend to fall off or blow off. They had a certain shelf life. I hope I don't get any hate mail over this one (!)

Saying all this, Manufactured Housing was a giant leap forward from the dirt floor shanties many children in my rural area lived in. They served a very important purpose to help foster greater home ownership. In fact the Department of Housing and Urban Development, the FHA and Veterans Association (VA) endorsed Manufactured Housing and still do the majority of lending on these homes. There have been improvements since those early days with many companies providing a much greener and cleaner end product that is unquestionably more affordable.

Modular is Better
So-called Modular Homes were the first major upgrade on this model. Built in sections similar to a manufactured or mobile home, they are constructed on wooden floor joists just like a stick built home (not a steel chassis) and once installed on their foundations, they are classified as stick built. This is a real advantage for the homeowner as they do not tend to lose value over time in the same way a Manufactured or Mobile Home does. Assuming a Modular Home is correctly built and installed it should last as long if not longer than a traditional stick built home.

The Modular factory built and Kit or Panelized Homes offer both speed of installation and resource efficiency. Often built to Energy Star standards and many such homes feature "green label" design standards. For more on these trends visit the US Greenbuilding site: www.usgbc.org and search their database for Modular Homes.

Cost and Efficiency
These days, the costs of true custom construction elude most of us. Architects and builders are looking more closely at modular methods that can offer the options of mass production, clean factory (under roof) environments paired with higher quality design and materials. For one thing, being built under cover means you don't get your materials wet...a very good thing!

Factory built structures consume far less energy than standard buildings. In many ways, they deliver a cleaner product with less toxic materials due to modern prefinishing of floors and cabinets prior to installation. Common flooring and cabinetry emit VOC's (volatile organic compounds) including formaldehyde-laced particle board and dioxin off-gassing vinyl flooring which create health risks for residents, especially young children and the elderly.

Homes consume a vast portion of our energy...with heating and cooling using 20% of our national energy resources. Insulation is a big factor in saving energy. High performance green homes are 30 to 50% more energy efficient than “standard” homes built to code. They use less water and because are constructed without toxic building materials they are more pleasant and healthy to live in.

Enter the Glide House
A 'Glidehouse', designed by architect Michelle Kaufmann, has been selling throughout the USA and Canada in a range of floor plans and sizes from 672 to 2,016 square feet. The home has glass curtain walls, bamboo flooring, features nontoxic paints and uses carpet tiles and counter tops made from recycled materials. It features natural ventilation and maximized daylight, water conserving plumbing fixtures and offers consumers a choice of high efficiency energy appliances and heating/energy generating systems. The cost? From $120 to $160 per square foot!

Traditional home building can easily cost much more depending on your area and resources. We seldom see homes built for under $160 per square foot in our area. I know one very effiicient green builder reporting $135 per square foot-- but this is rare.

The one thing the Modular or Glide Home companies don't address in their sales pitches is foundation methods. Foundations are the very bedrock of any home and methods will vary with your soil grade (slope) and climate. True green homes should take into account Low Impact methods of foundation design....and there are many! After all, why cause more harm to the land than is necessary...we are only visitors here!

Hint: Enterprising builders who become familiar with Low Impact and Modular installation will enjoy a great end result and very happy clients. Endorse and support this worthwhile sustainable trend!

Go forth and prosper! Loannetter
© 2007 susan templeton

40 Acres and A Mule?

2007-09-10T20:18:00.000-07:00

Hobby Farming Trend: Green Acres

Did you read your US History about Reconstruction after the Civil War? 40 acres was considered a livable farm for newly freed slaves who were willing to work for themselves. These days, a corporate farm is usually several thousand acres as small farms are being gobbled up. However, if raising a few herbs, lavenders or horses is your thing, you might do with much less. The trick for buying agriculturally zoned land for your gentle person's farm is to buy land that is not currently being farmed. Farming is a business--so land in production may be harder to finance up front.

Hint: If the land you love has an old farm house worth renovating, check out buying it with additional funds to renovate the homestead. A Renovation Loan gives you 6 months to renovate and is similar to a Custom Perm Loan in how it's managed. Specialist Construction Lenders handle this best. If a log home, modular or glide house is your dream, there are lenders who that specliaze in so-branded Green building methods including panelized, advance framing, and associated verdancy. Appraisers are the key here and Realtors who actually LIST these green home features are making green improvements much easier to value.

OH--and forget buying nice land with a mobile home unless it's post 1978 and a double wide home with a decent foundation. Older manufactured housing or a single wide home won't be fundable except at nosebleed rates.

Yes, there are Rural Loans and local banks who specialize in this area so that's a good start if what you really want is producing farmland. Residential lenders tend to balk anything over 50 acres or so unless it's typical for the area. Of course you WILL build that dream home they will be happy to have in their portfolio...so plan your investing accordingly. If you do need a second building for utility needs it you may be able to fund the second structure in your construction loan up front to save costs financing several projects.

Having grown up in rural farmland, I know farmers will do anything to keep their land and naturally banks count on this motivation. What that may mean is that farm houses sometimes fall into disrepair as a result of this over focus on land production. After all, you spend most of your time in the milking shed or on your tractor if that's your livelihood. Agriculturally zoned land is also harder to foreclose upon due to the land being your source of income so many banks won't touch rural land in production. 'Highest and best use' is the main determinant for land value. Banks like your house to be worth more than your land on a residential loan. That would suggest buying fallow land or land with pulp trees and then clearing it for your hobby farm. Do watch that little trap; land clearing is NOT cheap or easy. Not to mention wetlands mitigation (another very long subject). Just be sure to investigate permitted uses and build-ability. In this area we seem to have a new rash of flood mapping being handed down by FEMA much to the surprise of existing land owners. If you decide to buy a large parcel with plans to subdivide it later that will certainly increase the land value. Just be sure the lot sizes are allowed and timing is on your side as many areas have long term plans regarding subdivision.

In some farming areas, old apple orchards or dairy farms are being turned under for housing developments creating a political dilemma. Family farm groups may often protest this trend. Yet the need to pay for infrastructure for things as roads and schools depends on people paying taxes. It's a catch 22 for many rural areas. The conservation trend recently has been to preserve farmland in favor of cities and towns growing up rather than out. Sustainability means making choices that next serve the next generations so planners are struggling to catch up in areas where population is over-stressing their 50 year plan that became outdated in 10.

Many people will pay royally for their patch of green with a bucolic view. If you buy a nice home in a development next to a pig farm and the wind blows your way, it will be hard to complain to the pre-existing farmer. There are many cases on the books of just such disputes, so be sure you like the smell of ripe silage if you are moving near a dairy farm! Fortunately, the sanitary handling of animal wastes require farmers to take extra precautions to keep contaminants out of waterways., etc. but smells are harder to legislate! This tension between farmers and developments is a classic struggle. As cities move out, farms get squeezed. You may have noticed a increased urbanization going on in your town. Inner development helps to eliminate sprawl, reduce carbon waste of vehicles and convert brown fields and redeveloped lands to housing rather than put good farmland under houses forever.

Whatever you choice, if you do want to raise a crop or tend livestock, you'll find the effort of good dirt really worth it in the long term. Call your local County or State farm agency or check out their websites for local resources Their soils maps are quite a resource. Rural land and soil consultants abound to help you decide just what do to with your fine spread. Of course if you want to buy land and build your dream home/farmlette...call me...I love this stuff!

Happy growing! Loannetter

Winter Building Advantages

2007-01-16T21:01:00.000-08:00

While colder winter temperatures and wet conditions may cause delays on some aspects of building, the benefits of starting your project in winter may outweigh the inconveniences:

Financial Advantages:
• By starting the building process before March, you can often take advantage of the previous year’s material supply prices and avoid price increases that often occur by April.

• An earlier start means you can lock in your mortgage interest rate sooner, which protects you should rates rise before spring.

• Subcontractors are less busy and easier to schedule (negotiable?) during the winter months

Forward Planning
• Ideally, have your basement dug before February, after which time the deep frost of winter has usually settled into the ground.

• Have your construction scheduled so that the work that requires warmer weather – exterior masonry, and roofing, for example – occur during the warmer months of early spring.

Lot Research and Purchase
• By researching lots during the winter months, sites are more ‘revealed’ by the lack of tree foliage and undergrowth. Wetland and drainage issues will also be more obvious than in dry months.

• Precisely because few buyers enjoy looking at sites during winter months, you will find less competition and more willing sellers.

Design and Permitting
• Winter is the best time to design and permit your project because most architects, engineers and planning departments have fewer projects in progress. They also have more time to discuss your concerns so it's a great time to investigate your options.

Happy building! Loannetter

Lots Loans for DIY Builders

2006-05-20T13:33:00.000-07:00

Lot Loans are NOT as easy or available as home loans!

So you want to buy land and build your own home? Congratulations on your sense of adventure! Just looking at locations can bring up lots of ideas about how you want to live--which will in turn affect your ideal home design. Once you've found the right spot, if you need to fund the land purchase, don't be too surprised at the ho-hum response of your local bank.

Bankers like bigger!
First of all, bankers like bigger loans and lots are usually a fraction of the value of a home. Next, they will want a pretty hefty down payment: usually 25-30%. Why? Banks like homes. Government agencies support getting people into homes. Lots are a different animal altogether--so you won't find lenders leaping up to help fund yours! Lenders are about return on investment and what returns the most is the home they can put an easy value on because it's an easy thing to put on their sale shelf or portfolio. Land is not easy to unload in the case of foreclosure. If you buy agriculturally zoned land, your lender will be even less interested due to the potential of farming rights that might delay a sale or seizure. Of course what YOU see in your beautiful spread is not what excites your bank.

Interestingly, the reverse is true once you have a home on your lot. It is actually the LAND that increases in value more quickly than your physical home. A home can in fact decrease in value if it is not of very good construction and well maintained. This is one reason that lenders really don't like 'manufactured' or mobile homes because they have a certain shelf life.

The size of lot considered 'fundable' by your bank is usually determined by what lot size is typical of the area. So if you happen to buy 15 acres in an area where the typical home is on 1/4 acre, the value allowed will be based on 1/4 acre for your lot, even though it's bigger. If you've got the resources to secure a lot and do your own building project, chances are the upfront cost of the lot is the major consideration.

Funding your lot:
First of all the best advice is to seek a local or regional lender who is familiar with your area. A mortgage lender who works in the construction arena should be able to get quick answers.

Some sellers are OK about holding a note for a year or two but you can't count on that. If you do have a private arrangement be sure to get your name on title and record the contract. You can easily hire a lawyer to write up the contract for an hourly rate or flat fee and avoid commission on a private sale. Some realtors specialize in this area and are quite knowledgeable about builders so shop around.

Most lenders will offer between 65-75% on a lot with very few who portfolio an 80% loan on land. The reason: banks don't want to own land! Because land is not a quick seller higher rates reflect their higher risk. Most lot loans run for 1-5 years (with a balloon) to give you time to build.

If you plan to build your own home it's still a good idea to cultivate a specialist construction lender who will offer to convert your lot loan into a Custom Perm or Perm at the end of your project for a rate reduction. Not all lenders are interested in DIY builders unless you have a proven track record and stellar credit. They really hate new contractor's licenses and anyone who's been building for less than two years.

Plan for surprises!
If you happen to find yourself in the middle of a building project and costs have skyrocketed or you ran into a boulder when excavating your foundation--don't fret. There ARE banks who will come to the party and fund your project midway as long as your project meets their valuation criteria. These kinds of 'rescue refinance' loans are possible if you have a solid set of plans, full permitting and a solid appraisal. If you are doing something very alternative or hard to value you will have to plug on or seek private funding for serious interest rates and fees. Most Construction Term Loans (the building phase) rates start at 2-3% above Prime Rate. The fact is construction is a business-- so your lender and appraiser will need a thorough run down on your costs to date and specifications to verify what you've invested to date. Expect to pay more for a construction appraisal and of course your mortgage broker or bank will charge higher fees for their time.

Vested Value of Land
If you need to refinance your lot loan at some point...the land value will be affected by the sale date. If it's over 12 months then it's probably going to value at the current market rather than sale cost-- which will be determined by your appraiser or bank appointed assessor. There are considerations about what you do with it before you build...for example if you are going to put in roads or septic systems and utilities be sure you keep receipts for paid services and prevent the potential of liens against the property that could hamper your converting the lot loan into a Custom Perm mortgage.

The fun part!
Getting the feel for your own land before you build is a very satisfying part of the process. Choosing your home site to take advantage of views, native plantings, sun angles and wind directions are not often considered by tract home builders. Your landscape designer and architect will help you make these decisions to make the most of your site, however modest.

Happy building! Loannetter

© 2006 susan templeton

Dream Homes on Real Terms

2005-12-09T00:42:00.000-08:00

Designing For Reality
We all have our ideal home sketch tucked away somewhere, if only in our minds. If you find yourself driving around looking at vacant lots and touring new homes then maybe you are ready for the next step. Building your own home is challenging and fun. The first step is determining what you can afford. Some lenders or builders will push you to borrow the most you possibly can and convince you that you can afford an even bigger dream. In the construction world, that approach could easily backfire.

The cost of building your ideal home is really just the start. Until you have a full picture of the associated issues, including everything from topographic surveys and septic systems to permits and contingency budgets (oh yes) you would be wise to be a little more conservative--at least in the paper stage. Now that may sound a little odd coming from a lender. When you've been on both sides of the table, you know it might be nice to have a little left over to furnish your larger spaces and finish the driveway. Oh, and pay for the higher cost of cedar siding you didn't anticipate 9 months earlier. Don't be fooled into thinking a 'builder's quote' is all you have to budget for....you must include all the design, permitting and planning costs.

Once you have a lot, plans, a builder and a detailed cost list of materials, things start getting pretty real. I once heard an architect say that on average, most homeowners go over budget by about 20%. Let that sink in.

Land and Site Issues
Do you have a lot? If your realtor is working with you to find a suitable lot, they are often a wealth of information. A knowledgeable local designer will be informed about issues in your area, but it's a good idea to visit your local planning department to check on building restrictions unique to your area before you select a lot.

Before your close on a lot, include a contingency period to allow you to investigate issues related to building on that particular site. Besides zoning restrictions and sanitation issues, most county or municipal building departments have a number of land use requirements that you will need come to grips with. For example, is the lot itself 'buildable'?

Many people pick up a nice cheap lot, usually steep or with other problems like wetlands, and later find out the expense to build on their bargain was anything but. In the Pacific Northwest, where about 80% of our land is a watershed, you can expect there to be very specific issues like mitigating the impervious surfaces of your roof and driveway. Fortunately, your local building and planning department is also a wealth of information, so get in the habit of treating them with great respect and life will be much happier.

Choosing a Design or Architect
Assuming you have land, let's say you are ready to design your home to suit your site. Where do you start? Do you like pouring over plan books? Standard house plans have a remarkable similarity in that many are designed for flat lots, so if you have a decent slope you will need to start with the actual contours of your site. Time for that topographic survey. Builders, bless them, like to build what they know how to build...and more often than not (don't quote me please) they are building a home to be as marketable as possible. It is the rare builder who uses top quality materials and fixtures throughout and puts decent lighting in the bathrooms.

At the other end of the spectrum are architects and home designers. Architects design homes based on your needs, your taste and your budget. A good architect can actually save you money and heartache in the long run because they have the skills and knowledge to build a far better home. Home designers are also a very good, less expensive option, but bear in mind you get what you pay for. A draftsman is seldom very sensitive to space design, energy and materials issues. They basically draw up what you ask them to draw. Ask for references before you commit. I highly recommend that you tour a home or two built by your prospective consultant and actually speak to the homeowners about how they like living there.

Once I was reviewing architects and the homeowner pointed out that a rather interesting low ceiling cove was an 'accident' which the architect drew incorrectly on the plans. Their builder improvised rather than calling the architect to clarify the plans. Another homeowner mentioned their house was 10% larger than they expected because the builder's plans were drawn to the wrong scale. I kid you not.

Considering that you will be happily engrossed in making thousands of decisions along the way, it could be a good idea to hire a home design consultant. There are many kinds of design services from kitchen specialists to interior designers who may help you through the course of the project. Of course, picking out cabinets and flooring may be just your style, but not everyone is able to make so many decisions about so many things at the precise moment they need to happen!

Landscape Early and Often
One very often overlooked area is your landscape. Most people think of 'landscaping' as the part that happens after the 'land scraping'. If you have chosen a lot with intact natural features like trees--perhaps you appreciate their value. Not only is protecting trees important but so is protecting the soil and other fauna. Soil structures take many millions of years to develop and one bulldozer can undo a lot of the viability of your soil in an instant. If you are interested in Low Impact Design then it's time to research appropriate methods in your locale. If you prefer to consider your site as something to be beaten into submission and flattened, you will find many people willing to help you do just that.

Consider your neighbors before you cut down every tree...including the birds and raccoons that live in them and help create the ambiance that lured you there in the first place. In fact, the best time to call in a landscape designer is before anyone sets foot on the land. A good landscape designer or landscape architect will work with you, your builder or architect in the kindest way possible to help your home and site work together. In fact, if I had my way, I would hire a landscape designer to help me pick my lot and brief the architect before picking up a pencil.

Doesn't all this sound like fun? I hope you will enjoy living in your new home as much as you enjoyed participating in it becoming a reality.

Wishing you every building sanity! Loannetter

Clean Green Mortgages

2005-11-27T14:11:00.000-08:00

You don't have to go to a Big Box Bank for a Green Loan!

Some enterprising bankers are wrapping their Energy Efficient Mortgages with bright green ribbons to meet the hot new sustainable design trend. Don't fall for the greenwash. All loans, lenders and so called 'green products and builders' are not created equally.

Greenbuilt, Built Green and Energy Star resources are available online through various agencies. www.greenbiz.org is a good place to start. In a nutshell, a green home should have higher standards of health, energy efficiency, and resource use. There is a big emphais on local sourcing, recycling and choosing materials that are non toxic and last longer. Lots of builders call themselves 'green' but it pays to check their actual rating or cerfication. If a builder has passed LEED or Builtgreen or Energy Star certification, they can also certify the home--which will help you qualify for a green mortgage. Ideally, this suggests you can borrow more at better terms.

Custom Construction Mortgages for green homes and renovations are becoming more available for consumers to improve energy and resource use. The model has been around for years. The original FHA Energy Efficient Mortgage (EEM), was invented in 1979 to retrofit older homes to be more energy efficient and has been adapted for newer technologies by progressive lenders. These loans allow you to 'borrow more' by taking into consideration lower ongoing maintenance and energy costs. Our construction specialist lenders support the move toward higher quality custom homes that conserve resources because they are sound investments. Call around and speak to a few lenders about your specific project. Few will qualify for the FHA/VA version. Specialist construction lenders will have a solution to meet you needs. Some lenders may advertise 'green mortgages' and then switch you to an easier product. As always, find out how much you can borrow before you start designing your new home or renovation.

NOT all lenders and banks who offer construction loans actually know much about green building. You may have a hard time explaining the financial advantages of SIPS, Advanced Framing or Low Impact foundations.. so pick your lender wisely!

Wishing you every building sanity! Loannetter

How Construction Loans Work

2005-04-18T18:20:00.000-07:00

There’s probably nothing more challenging and fun than building your own home. It helps to understand how your lender sees you and your project: they want you both to succeed!

Whether you intend to build your own home or hire a professional architect or builder, you need to know a few facts about your project before you apply for a Construction Loan: 1. The specific time frame required to build your home, 2. How much equity (cash and/or land) you are bringing into the project, 3. How much it will cost to build your home, and 4. Liquid assets you will need (to live & operate) during your construction period. Naturally lenders have higher credit standards for complex projects. This is NO place for the first time homeowner.

Your Home Building Team
At the outset, whether you are designing your own home or hiring a home designer, you will need to find a lot suitable to your needs and design. A realtor working your architect or builder is a great asset. Working with a designer or selecting a plan for your home that reflects your personal style is the fun part! It helps to have a lender involved early in the process who understands what you are trying to achieve.

It’s very smart to get a landscape designer working with your team before anything happens on the site. In the case of our Pacific Northwest terrain, many valuable trees and plants may already exist on your lot. Heavy equipment can compact soil and undermine your site. Having a professional identify and protect what is there can save you many thousands of dollars trying to rebuild nature’s work.

A home’s impervious surfaces (your roof and driveway) displace rain and ground water from naturally seeping into the soil. Runoff is not usually a good thing in terms of flooding or pollution risk. Increasingly, builders are being asked to mitigate impervious surfaces with water catchment systems. Check with your local Building and Planning Department about their permit guidelines. Naturally dry regions will have very different guidelines for resource conservation.

Greenbuilding = Future-proofing
Greenbuilding and Energy Star are becoming the new industry catchwords. These higher building standards insure your home will be ‘future proof’ as well as be more pleasing and healthy to live in. LID or Low Impact Design starts literally from the ground up. It's a good idea to carefully select your site and note any potential problems (like wetlands and slope) with the help of a surveyor or environmental engineer. Certified greenbuilt homes also cost less to maintain and heat or cool over a lifetime. Local energy companies offer rebates for high efficiency fixtures and lenders are starting to talk about how lowered energy costs may offset a borrower’s cash flow requirements. Some lenders offer an Energy Efficient Mortgage rebate!

Working With a Construction Lender
The best construction lenders are specialists with highly skilled in-house teams who review and approve your plans, your builder and own creditworthiness. The process is more involved than a traditional mortgage because you are asking to borrow funds for something that does not yet exist. Interest rates are often higher during the course of construction phase due to the increased risk.

You must provide detailed plans, engineering, sewer/water plans, all permits, and a list of materials and full cost breakdown with your application. An appraiser reviews these documents in order to value the proposed home. After it's complete, your appriaser will return and verify that it has reached projected value and issues a completion report.

Pricing Your Project
Hard costs (materials, labor) and soft costs (design, fees) are used to establish your Cost Estimate. In addition to building costs, lenders encourage you to budget realistically for landscaping, window treatments and other fixed assets like fencing and security systems that will enhance your home’s final value. Your appraiser can assist your understanding of exactly which upgrades will add value to your specific home.

Your mortgage broker will order your appraisal, review your budget—factoring in contingency fees and closing costs—and negotiate your terms. Once the loan closes, you start building. Your bank inspector authorizes the flow of funds and helps keep your project on track.

The Building Phase
After your foundation is in, your lender’s agent inspects your site on a monthly basis to verify that the work has been performed to standard, before authorizing that month’s payment. It’s quite an efficient process once you get the hang of it. Note: inspectors just report what they see to the lender. Lenders won't authorize payment for anything that is not complete or fully installed...for your own protection.

When your home is near completion, your appraiser performs a final inspection report before you move in. Any remaining funds can be reduced from the principal or used for additional landscaping or fixtures. You then convert the principal owed to a permanent mortgage. For more information about the range of permanent loans, visit our Loannetter Blog.

Remember, once you have built or renovated your home, you will enjoy your personalized results for many years. Home Building & Renovating can be rather infectious—you may want to do it again!

Wishing you every building success! Loannetter
©2005 susan templeton

Custom Construction Loans

2005-04-18T18:14:00.000-07:00

Construction Lenders offer a range of funding options for Owners, Owner/Builders and Investors of 1-4 Unit Residential Dwellings for up to $6 million dollars.

It wasn't so long ago that if you wanted to build your own home, you had to first either buy your land or get a lot loan, then get a construction loan, pay the closing costs, build the home, and then refinance the whole kitandkaboodle into a mortgage = 3 hassles and 3 sets of closing costs!

Custom-Perm Loans (1- Step, 2-Step or One Time Close)
Custom Construction loans are designed to allow a home owner or investor to custom build a home and cover the cost of land, design fees, contractor(s) and other hard costs in one loan.
After the Construction Term (4 months to 2 years) is finished, your loan is then converted or ‘rolled over’ into a Permanent Mortgage. There are no closing costs when you convert from the construction phase to your permanent mortgage unless you change lenders.
Interest payments may be rolled into the loan so you don’t have to make payments out of pocket while you are building. A guaranteed interest rate at roll-over may be negotiated at the beginning of the construction term, as long as your project is on time and budget. The advantage to a builder is that the borrower carries the financial risk. The advantage to the homeowner is true ownership of the project and the ability to personalize the final home to a far greater degree than a ‘Spec’ home.

Renovation Loans
These loans are designed to allow a prospective Home Owner or Investor to acquire a home in need of repair with extra funds for the purpose of upgrading the home. An appraisal determines the ‘as is’ value and the ‘as built’ value of the home. Your lender manages your budgeted renovation funds for up to 6 months, during which time payments are on a monthly schedule, until the final appraisal or inspection is complete. There is also one closing, similar to the Custom-Perm loan.

Land and Lot Loans
These loans allow prospective home owners to acquire land upon which to build a home. The terms are usually for 1-5 years, after which time you may convert to a Construction Loan. Lenders require 25-30% down payment due to the higher risk of an unimproved property.

Bridge Loans
If you currently own a home (in your lender's licensed region) with significant equity, some lenders will allow you to 'tap' that equity during the building phase, assuming you sell current home after your new home is finished.

Lender Criteria
If you have very good credit and can effectively navigate paperwork; you may be a good candidate for a construction loan. They require much more effort than a standard mortgage! Lenders rate risk on the same criteria as conventional loans, with moderately higher rates during the short Construction term due to the higher risk involved.

Custom Building Advantages
There are real advantages to both the builder and homeowner. For starters, your builder will appreciate not having to wear the financial risk (or tying up assets) and being paid every month. As the homeowner, you have real ownership of the project. One advantage is saving at least one set of closing costs. When you purchase a home from a builder, their financing costs are passed onto the buyer. As a homeowner in charge--chances are you can build in a higher quality standard in your upgrades and personalized finishes than you would with a spec built home.

A word of encouragement: find a good builder or consultant to oversee your project and don't try to do everything yourself unless you have extensive and recent building experience!

Wishing you every building success! Loannetter
©2005 susan templeton