Home Buliding and Interior Design

If you want to build your home with a general contractor or as an owner builder, you are almost certainly going to need financing in the form of a construction loan or an owner builder construction loan. So, before you ever commit to that dream plot of land, you better first understand the zoning implications – not just for your county’s building permits but also for your owner builder loan terms.

Almost everyone who is considering being an owner builder or hiring a GC to build their home for them already knows that the zoning on the land is vital to your ability to get building permits issued. For example, if you want to build your single family residence on a piece of land that is zoned only for commercial buildings, then your county almost certainly isn’t going to issue permits.

But, what if the county did allow you to build your own home as an owner builder on a piece of land that is zoned for commercial buildings? Can you do it? Yes, you can, as long as you don’t need to get an owner builder construction loan. In other words, as long as you have the cash to buy the land and build the house out of your funds, then you’ll be okay. But, if you need any sort of a loan, especially an owner builder loan, then you’ll never get it approved.

Therefore, it’s important for every owner builder to realize that the lot’s zoning is vital not just to the issuance of county building permits but also to the approval of a construction loan. So, let’s take a quick look at what is ideal, what is acceptable, and what just won’t work.

It would be ideal for an owner builder construction lender if the borrower is building his single family residence on a piece of land that is zoned for residential single family residences (typically annotated as R-1 by the county – though every county is different). This seems pretty obvious, but it is worth pointing out that a property can also be zones for residential properties ranging from single family residences to multi-family residences. Will this be a problem for an owner builder construction loan?

You should have no problem with financing on a piece of land that is zoned for multi-family residences, as long as it is also zoned for single family residences. However, you will want to make sure as the owner builder that there are going to be other single family residences in the area. If you are the only single family home in the area, surrounded by duplexes and multi-family units, then you will have a tough time with your loan’s appraisal.

What if the land is zoned commercial? Well, as mentioned above, your owner builder loan will never get approved if the land is zoned commercial instead of residential. This is true for any construction loan, not just owner builders. But, sometimes the land will be zoned to allow for both commercial and residential. Will this be okay?

Yes, you can get an owner builder construction loan approved in this case, as long as you can get a decent appraisal done. For example, imagine a piece of land that is zoned for either commercial or residential construction. There is a good chance that it is surrounded by commercial buildings instead of residential buildings. Your appraiser is not going to be able to find 3 or more comparable residential properties that have sold within the last 12 months in your immediate neighborhood/ area. Therefore, the owner builder lender is not going to be able to approve the appraisal, which spells disaster for your financing options.

But, this is not a very typical scenario. Something that is more common is a problem that often arises in rural areas. Often, land is zoned for agricultural purposes instead of residential construction, which will cause problems for any owner builder financing. Let’s take a look at an approvable scenario versus a scenario that will be denied.

Financing will be possible for owner builder construction on agricultural land only if you can meet a couple of important criteria. First, you have to show that your property will not be used for anything agricultural in nature. An owner builder must be building his home and only his home. This means no livestock and no farms. If you want these features, then you technically no longer want an owner builder construction loan. At this point, you should be looking for an agricultural construction loan.

Second, you will have to show that it is common in your county for other families to build single family residences on agriculturally zoned land. These other properties cannot have any agricultural uses. For example, in some rural areas, it’s common for the county to simply zone every property as agricultural. In these cases, it’s pretty typical for properties to be used strictly as residential properties without any agricultural use. Therefore, an owner builder construction loan would be possible.

However, if your county has a mix of residential and agricultural zonings, then you will run into trouble trying to finance a residential construction project on a piece of land that has been specifically zoned for agricultural use. You would need to switch the zoning to residential if you wanted an owner builder loan in this case.

Owner builder construction loans are designed for residential construction only. Therefore, before you commit to buying your dream piece of land, you should take a moment to understand the property’s zoning and its implications for owner builder financing.

As the real estate market continues to grow rapidly and new technology gains ground, widely accepted beliefs that were true a few years ago may not be true today. Don’t jump into anything blindly or sign a real estate contract or home mortgage loan contract or any other type of contract without giving it some serious thought. Before you commit to a real estate purchase you’ll need to find a lender for the real estate financing of your potential home or investment property.

Your income and your debts will typically play the biggest roles in determining what price range you should be looking at. Fifteen-year mortgages are an ideal option if you can handle the higher payments and if you’d like to have the loan paid off in a shorter period of time. Thirty-year fixed-rate mortgages offer consistent monthly payments for all of the 30 years that you have the mortgage. And if the market is good, you can benefit considerably from locking in a lower rate for the full term of the loan.

Most adjustable rate mortgage programs offer what is called “rate cap” protection, which limits the amount the rate can be increased each year and over the life of the loan and all adjustable rate mortgages are amortized over 30 years. Make sure to get an estimate of your real estate financing closing costs from the lender you’ve chosen. By law, the lender is required to give you a statement within three days of receiving your loan application. Any of the loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI).

A mortgage application can be resubmitted many times; it’s not uncommon for this to happen. Interest rates can go up if a picture is painted of a rosy economy and that it is flourishing, like more jobs being available. This can lead to inflation which will make the rates go up. Any money that you receive from a lending institution will show up on your credit report and the payments will factor into your debt-to-income ratio.

A reported FICO credit score is not a requirement for most conventional or government loans like FHA loans or VA loans. Potential borrowers can submit information about income, assets and equity to determine just how much a down payment should be. This is usually processed through an automated underwriting system. Twenty-year fixed-rate mortgages allow you to make a consistently higher monthly payment throughout all 20 years you have the mortgage. The shorter term means you pay off the loan off quicker and pay less interest and build equity faster than with a 30 year loan.

Check with you CPA pr other tax advisor for the most current tax information; your property taxes may be deductible. If you’re working with a home builder within a sub-division or housing development and just making carpeting, lighting and appliance selections for a brand new home, you’ll probably be able to get a standard mortgage loan. If you’re hiring contractors, electricians, plumbers, and painters, you’ll probably need a construction loan, which provides funds to pay the subcontractors as the work goes along. If you plan to borrow money from other sources, some lenders may impose limits on how much of your down payment can come from other sources.

When financing real estate with a conventional loan it’s important to know that a low FICO credit score does not mean you won’t qualify for a home loan or home mortgage. The FICO credit score is just one of many factors that are considered in loan or mortgage applications. Although the FICO score is taken into account there are no minimum scores required.

Ask other homeowners for advice about what real estate and mortgage pitfalls to look out for. Work with a reputable mortgage broker or lender to create a customized loan program with the best combination for you of rates, points, and closing costs to meet your needs. Before you finish with any real estate financing make sure you read every real estate contract and loan or home mortgage contract carefully before you sign on the dotted line. Each and every line is important – look for anything that’s vague or not clear and don’t be afraid to question what you don’t understand.

As the nation’s real estate market continues to grow and new technology gains more ground, many widely accepted beliefs that were true just a few years ago may not be true today. Before you go after a home mortgage or home loan or any real estate financing, if you have a lot of bad credit because of consumer debt such as credit card or personal loans, try to eliminate or reduce this debt as soon as possible because it’ll affect your ability to qualify for a home mortgage and the estimated monthly payment.

Some tips to know: whether you’re financing or refinancing. most people move or refinance within a seven year period. And loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI).

If you’re going to buy a second home or second property, you’ll need to identify the source or sources of your down payment, since you won’t be selling your current house and using the proceeds, and you’ll need to expect a larger monthly payment for housing and other related expenses too.

If you have a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage. Although it’s not legal in all states, it will allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference; make sure that a wraparound mortgage will not trigger a due-on-sale clause ask the lender in advance.

Many people are not aware that they may be able to customize the length of their loans. Ask the mortgage broker or lender you’re working with. Although lenders usually advertise 15-year loans and 30-year fixed rate mortgages, applicants can ask for 20 years, 25 years or any other number of years that would work better. This may allow borrowers to build up their equity faster and keep their monthly payments in a range they can afford. Some lenders may impose strict limits on how much of the down payment can come from borrowing from other sources.

Some of the advantages of adjustable rate mortgages that are touted include: lower costs – because they are usually priced lower than fixed-rate mortgages so you can increase your buying power and lower your initial monthly payments then if the interest rates go down, you’ll have lower payments. However in all the years I was in the real estate business I never advised anyone to get this type of loan. With the changing market trends one can find themselves in a heap of trouble just like that. This would be a last resort loan and one would have to be sure they were not going to be unemployed in the next few years.

If you’re working with a local builder within a sub-division or housing development and you’re just making carpeting, lighting and appliance selections for a brand new home, you’ll likely be able to get a standard mortgage loan. But if you’re planning to hire the contractors, electricians, plumbers, and painters, you’ll probably need a construction loan, which provides the funds to pay the subcontractors as the work goes along.

You will want to work with your mortgage broker or lender closely to develop an individual home loan or home mortgage program based on your credit worthiness. If you have or think you have a less-than-perfect or ‘bad credit’ credit report don’t worry too much about it. When financing real estate it’s important to know that a low FICO credit score doesn’t mean you won’t qualify for a home loan or home mortgage. There is much ado about the FICO score these days but there are many instances in which it isn’t going to interfere with getting a home loan or mortgage.

If you do borrow money for a down payment it must be disclosed to the lender or if any of the money for your down payment was a gift, be ready to provide proof of it.

The 20-year fixed-rate mortgages allow you to make a consistent higher monthly payment throughout all of the 20 years you have the mortgage; the shorter term means you pay the loan off quicker and therefore pay less interest and importantly, build equity faster than you would with a 30 year loan. You’ll also need to take into consideration what the closing costs will be. Ask about the escrow account for taxes and insurance.

Make sure to ask other homeowners how they’re doing and what real estate financing and home mortgage or loan pitfalls to avoid. And whatever you do don’t get yourself into a situation where you are unable to make the mortgage payments; make sure to think far ahead. Try not to get too overwhelmed with all the different home loan and mortgage choices available.

Make a list of questions and get the answers from any real estate agents, real estate brokers, mortgage lenders and any other real estate professionals you know or meet. Ask them about real estate financing, home mortgages, home loans, refinancing and current mortgage rates. Go online and get home mortgage quotes. Online quotes can often be cheaper because of the elimination of middlemen for example. And compare the quotes with other quotes you get locally to find the best rates for you.