Construction financing question- anybody know?

[Wcross]

I am entertaining the thought of building an addition to my home. It will be an additional 1400 sq ft (added to 680sqft I have now). The property it is on is 15 acres and I still owe 10,000 on the first mortgage.
I found a company that will dry it in with a basement for 55,000. I would like to do the rest of the work myself as time and money permit.(it might take two or three years). The small house I live in is functional and it would be adjoined to the new structure.
Do you think a bank would do a construction loan to permanent financing without completing the interior of the addition? I would qualify for about 120,000 with my income on a 15 year mortgage so 65,000 would be within my means for a mortgage.

I would rather do the rest of the work myself as I have more time than money and I want to add a lot of built-in's/features that would cost 2-3 times more if done by a contractor.

Do I wait five years and pay cash or can I get a mortgage?

[ewagner]

1. Construction-to-permanent

is pretty common...

your bank should be able to do it but it's also possible that some private mortgage originator could do it too...

Nationwide, I think the folks at Moneywisemortgage should be able to do it...when I sold mortgages, our company had a "market" for those loans so I think it was pretty common.

[Wcross]

2. What about not finishing the interior for 2-3 years? N/t

[ewagner]

4. edited

have to go back and look at my old underwriting guides...It's been a couple of years and I didn't deal with too many construction-to-permanent loans....so I'll defer so I don't lead you astray.

[Wcross]

6. I appreciate your honesty and advice ewagner!

I am in the tossing it around stage right now- I really don't want to talk to a lender yet, just trying to a feel for it.

[joneschick]

3. short answer. Nope

for a construction loan a bank will require a report on the builder, an appraisal including the plans and a building contract detailing all the details going into the finished product. The escrows and inspections and any lien waivers are handled by the title comapany. At least. What some folks end up doing is doing the work themselves, with their good friend Home Depot, keep all the receipts, pay off the home improvement with a refinance when it's all done.

[achtung_circus]

5. Without getting into the market value of the property

If you are currently eligible for 120k and the cost of the bare bones is 55k you should be good.

The carrier will look to see if you have some collateral (in the form of property improvement) to cover their loan. They won't give you 100%, but 80% is reasonable which would be 96k.

Doing work yourself is a great way to save money, as long as you schedule it and don't mind living in a construction site.