Use A Construction Loan To Build A House?
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- Опубликовано: 15 июл 2022
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I got a construction loan to build a home on land 2 different times. First time I hired a UN-licensed contractor to build on my land (a retired crop duster) 2nd time I obtained the construction loan and built the home myself, no issues on either. Both homes when I got my CO I walked in the door with over $100,000 equity. I still own both, renting the one on 2.5 acres & paid off, other I live on 35 acres almost paid off. These guys are right- PAY OFF YOUR LAND FIRST. Live in a RV like 5th wheel on your land while you build, saves major $$, then sell RV. Check your marriage first.. :)
Hey there just a question, how did you go about getting a construction loan without a licensed contractor. I keep getting told that we need a licensed builder/ contractor in order to get the loan. We were hoping to build but having a hard time finding a GC 😒
@@caseyd3963 First time I purchased modified blueprints of the home I was applying for a loan on. I was advised the bank doing my construction loan will do a pseudo appraisal off the land+blueprints, then approve the loan. 2nd time I purchased a panel-ized kit package from Canada which came with blueprints to use for the loan. Since I had the 35 acres already paid for, just the land value qualified for the construction loan, but the prints helped. I bought that from Nelson Homes in Alberta, price included trucking, 6" framed walls, sub-floor, shingles, drywall, insulation, windows minus flooring or cabinets, foundation and utilities, like well and septic/power. No licensed builder needed, just prof of value.. Also, when you do the electrical you can pull a "homeowners electrical permit" and do the wiring yourself or farm it out to someone else, no license required. These were in Colorado.
Me and my wife are going to start this process next year ! We finish paying off our land in June 2024! Can’t wait !!!
I did a construction loan for my home..one piece of advice to anyone wanting to build a house is to take your time and do your homework on the contractor you choose to build your home... Interview several contractors and visit with the home owners they have built for. this is so important, because once you start a build with a contractor, you are in a since married to them and it is very costly for the home owner to "divorce "and or replace the contractor during the build. the home owner and contractor must be on the same page and have a good relationship.
We are saving cash to buy land this year... then I'll prepare a build site, get permits, and save cash to build a house for about $250k myself. I used to work construction, now I'm an Engineer. Being able to build your own house is a blessing.
I found the information helpful. Hadn’t considered that the paid for land could be considered a down payment. Thanks for sharing.
I’m planning on building a house on my land this year and I just found out I can use it as a down payment!!! So excited that I ran into this video because my land is worth $60,000.00 and it’s payed off…I’ve been trying to save the money for the down payment. Now I will work on getting my blue print this month 🎉 I also already have a contractor.
Wishing you the best asking the process of your build!
Good video, coupled with Dave's other advice that building a home is a project management exercise which needs a schedule, budget and plan of all details.
I am an unmarried person on a single income and I’m trying to get my land paid off. I have $18,500 left and once it’s paid off I plan on working on house plans. :)
Hello, did you have an estimate of what your land is worth? If it's more than the value required for construction loan and balance owed do you think a lender would satisfy the other lien holder?
Thank you very much. Very informative !
Here is what he isn’t mentioning that is a HUGE savings for the builder. You can pull a permit to live on the property for 18 months to 2 years (6 month extension), if you’ve already pulled the permit to build. That means you’re saving hundreds, if not thousands, of dollars monthly by living on your property during the build without having to pay rent or a mortgage elsewhere. This is what I’m about to do. Rent out my primary, which will net me an additional $800./mo. After the mortgage is paid, pull a permit to build on land I own outright, using its $100k value for the down, then pulling the permit to live on the property during construction, pulling my travel trailer onto the property and living rent free for the next two years. I will save as much as $2k per month, which will allow me to pay down the loan amount as soon as it gets converted to a traditional loan.
Yeah, but you need a travel trailer first. Works for someone who's single. I'm a family of 6, we are about to buy land and build. We'd like to stay on the land for a bit first, but it's not realistic. First off, I'd have to buy something larger enough for 6 of us to live there. Secondly, the winters in the area get down to negative 30f at times.
Living on the land before building isn't always feasible.
I did this same thing my house will be completed next month in April , very happy I went this way too
Very helpful, thanks!
We have new neighbors building a home here in our subdivision- they waited months & finally got their windows in this week. Everything takes months to get. Garage doors but none of the parts that make it work, it’s a running list of issues.
Could never see it being worth the stress personally
@@gmarie3053 lol
@@gmarie3053 totally agree. Going to find out tomorrow if I can open escrow for a 5 ac land purchase. Interest rate is too high right now to get any loan. Gonna just have to wait. I totally worry about the stress. But, the builder told me
he will help to get the permits, I just need to pay the fees. Guarantee it won’t be that simple.
We just built a house using the land as the down payment using a construction loan and everything was great
We're just starting learning about this, but have land so where do we start
I hope to do this some day :)
@@skinner4494 find a lender who does contruction loans and will use the equity of your land for a down payment. Thats what we did anyways.
Rachel did you hire a builder ?
@@ginnitoor2339 we did some contracting and building ourselves, but hired a buidler for most of it.
absolutely this is a wonderful video. thumbs up !.,,.
Loved this video
I greatly appreciate info like this. My wife and I are in the same boat roughly. Just waiting for prices to become reasonable again in order to build.
It won’t work for few years as everyone is waiting for that.
Build now. Materials are cheap and contractors are available
@@cjspencer5396 Any tips on buying materials
excellent summary by Ramsey
I like people that take an alternative path, they will be pretty fine and debt free in less than 10 years.
Hey guys, so need some advice. My husband and I are looking to build a small 800-1,000 sq foot house on my parents land. We made a deal we would pay for all the taxes if we build where they are. My husband has a 820 credit score, mines 740. We’re lucky as right now we’ve payed off all our debt. Just my car payment. He’s been at his job 15 years, I’ve been at mine for 5. The towns approved us for 1,000 sq feet. But I don’t want to get my hopes up. We have about $10k saved, I know we need to save more but idk if we should start taking the next step or wait for something on the market… but nothings less than 500k, and we need a home ☺️
Dave, I have the cash to build, should I still get a construction loan and put down almost the purchase price just to reduce the interest and have some oversight on the builder?
Wow I was not expecting Missoula That much expensive
My bank actually did have an option for DIY home construction but it was more expensive and required plans and a large contingency
What bank was that?
Looking at great falls
I really liked the personal moment between Dave and Rachel about Dave’s real life
This was a very strange call
I’m building mine debt free and buying and building as as I can. It’s been a great learning experience.
What about using a First Lien/First Position HELOC or Personal LOC to pay off the construction loan?
@Dave Ramsey, are you still planning on building that house this spring? Curious what the cost of labor is doing by you at the moment. My wife and I are in the process of building our home as well. We were quoted around $250 / Sq Ft.
Glad we built before the pandemic. Materials, land, labor, and mortgages were way cheaper. Our house would cost at least 150,000 more to build today than it did 8 years ago. It’s worth it if you can pull it off. Thank goodness we used one of our rental properties to live in while they built because we were 5 months past the tentative completion date. We used a smaller, local builder and overall we are 95 percent satisfied. There will always be things that get delayed because of the many moving parts but you need to be active in the process. We lived only 5 blocks away in our rental during the build so my wife checked on the progress almost daily.
I guess it would help a lot to have an acquaintance or friend who actually builds houses
also to have $3 or 4 x 1000. in the bank
Great info I is this the same in California not the price obviously but the process.
Don't hurry. Just wait.
I was quoted $50k for a 14 x 20 deck! Ya, I'll wait.
My friend in Oregon wanted to have his deck stained in preparation for summer. Requested bids in April. They couldn’t do the work until September.
Just hold tight Joana. Hold tight! Your time will come. Just ride this wave out.
This wave is not ending lol
Oh...
Churchill Mortgage
Are they anything like Time Share Exit Team?
I remember them!
Can you build a home, on your own land using an established builder (ex. Newmark Linz model)? Or do they have to be in their lots only? Because Houston area homes lack yard space!
Huh, that's exactly what I think about Houston. I am Polish, who lives in Michigan, thinking moving to Houston (I want Texas, my wife specifically Houston), but the houses are packed! Of course speaking about new ish construction in nicer areas. There is a lot of land around the city 😅
Just what i just did recently. Got it for 1yr loan. 💪
Churchhill mortgage SUCKS... I had to file a complaint against them with the CFPB
Just check out concrete prices and then decide if pouring a foundation/driveway/flatwork seems like a good idea and that's just a small part of the build. Just paid 2x prepandemic prices just to finish some stone veneer on the house.
Why didn’t you wait till prices came down?
@@taylorsmith9629 because prices may not come down for several years into 2024... and they may never go down to prepandemic price levels. Also, I can afford it and wanted it done.
@@uwone7778 here we are April 2023 and lumber is now back to pre pandemic levels in the Midwest .
@@dtm7909I’m not 100 percent sure on this but concrete has stayed the same .
100 for land 300 for build. I'm from Montana that will immediately appraised for at least 700k
Wife and I are doing it (and our 4 kids). We found land for about $200k, another $450k for the build. We are putting $250k down in total. I'm guessing we'll end up with about $350k equity right from the start.
We just got a construction loan and do not have a contractor. But that’s probably because my husband is a carpenter? I have no clue. But we just got approved for 182k
Based
How is your land value appraisal?
We have a small house on a large property in TN. Our house now has a very large amount of equity. We would like to build another property on our land & keep the 1st as an investment. When should you do a HELOC vs Construction Loan? Or just does it depend on where you shop around for the best terms, rates, etc.?
Check with your county’s planning and zoning guideline, to see how much land is required to build. Then find a Contruction loan, that allows you to use the land as down payment for the loan, providing it’s valuable enough to equal 20% of your loan. Heloc can be used in a few ways, but I wouldn’t use it for such a project.
@@jgyrwa OMG thank you for responding!! I've still been so confused about what to do & not sure who to talk to. Thank you again!
DR is against a HELOC@@alexaclaire8728
I need your wisdom sir on something . I was given 2 acres of land with two houses on them . The problem is the houses are not in good shape one needs work the other is a shell of a house . I was given 50 grand by my auntie who passed away . I want to be a landlord so bad but right now college is in the future so I will go from making 4500 a month to 3000 a month . Is it possible to start remodeling the houses and go to college ? All my college is for free so it’s really hard to pass it up . But I can’t help but feel like I’m missing out on being a landlord . Please give me some good advice on how to even go about this .
What about a usda construction to permanent loan ?
Except Dude, not enough carpenters. Workers are building large projects. A builder I know in Arizona will not even look at new home builds.
Wow she sounds so enthusiastic
Stop it 😆 😂 🤣
She must have a amazing personality
Worst time to do anything, everything is damm expensive
I think we are just entering bidenflation, meaning that theoretically, real estate, land and buildings, are going to continue rising in price.
It’s the new norm nothing will ever be the same
"I stay... I work at home" lol :D
Sorry Dave, you are wrong in this. You can be a owner builder and be your own contractor.
We are going through the process in southern Nevada right now and by me acting like the general contractor I’m saving us about $120,000
I have to say that he's wrong. You can be your own builder. This is our 2nd build, we don't have a lot of experience doing it ourselves. We own our land. We had an engineer work up our home on a piece of paper that contained electrical, etc. We went to the county, got our building permits and started the house. We borrowed 120,000 and it's appraisal is 297,000. We have 1 year to build. 3 months in and we're almost 50% done. You will need money to put in septic, water, power and an up front money for the loan but it's doable as long as you don't get crazy with your design. Ours is a 1700 Sq ft, 2b2b home.
Could you give me some information?
@@landonray5084 What else would you like to know other than what is stated here
Quick question. Where did you borrow the money from. ? I found a place that loans money to an owner built new construction loan.
We got our loan from a local bank here in GA
@@rhondastill2624 how much did septic water and power cost? Thanks for the reply
So if I am selling my home and will make a profit and get 100% out of debt by paying it all off with the profits from the sale. Would it be smart to just buy the property outright? And use land as the down payment? We would be paying for the land in cash, and then get the construction loan and permanent mortgage?
Typically land has to be bought with cash, I've heard it's very tricky to get a loan to buy land.
We just did this. Sold our house last month and bought our property. Paid off all debt ( very freeing.
Wow we are headed in this direction too. Seems like people are waking up to alternatives
Yellowstone 🤠 although most of the show was filmed in Utah
That show ruined my state
Why is land so expensive, do they have to buy >10 acres at a time? If its for a home, can you just buy 1 acre (43000 sq ft), and pay it off real quick, before taking the construction loan?
This call made me nervous. I really hope it works out for them.
How does this call make you nervous? LoL
Nervous, how? Your post make no sense and it’s silly.
@@JonathanIvy221 it's called empathy
I would like to have at least a year of expenses saved up before even considering it. 6 months isn't enough when you own a home. You should have a cushion to help in case of something happening.
@Dave
We are also thinking of buying land and building in Montana. We found a lot for about $200k and are trying to spend not more than about $450k on the house itself. We are going to sell our existing home and use the $250k equity as a downpayment on the construction loan for the new house.
We have a realtor lined up. We have a builder chosen. We have a lender with pre-approvals done, etc. We also took a HELOC out on our existing home to unlock any cash up front we'd need prior to selling our existing home and using that equity.
I was expecting a bid from a builder today, but haven't heard from them yet. Also met with a realtor and the builder at the lot so they have an idea of what to expect for the build (it's a level lot). Is there anything we are missing? Once the builder gives us a bid I think next step is to get a blueprint/plans paid for? And at the same time I think we should make an offer on the land?
I wish we could somehow sell our house now and use that to buy the lot with cash then live on the bare land while we build the house. The problem is I have no idea what we'd build on the land for temporary shelter (especially for the winter) as we are family of 6 (4 kids).
Uh oh did Dave Ramsey’s advice back fire on this couple ? Sort of sounds like it.
I love when people watch DR's videos looking for financial advice and then pick apart everything he says.
Nothing wrong with challenging the status quo
Does Dave recommend not building your credit or something?
were booked till 2025 so a favour it will be especially with that attitude. In canada you do not need to be a builder or hire one to take out a construction loan. I have done it and am only a carpenter and did not need to prove it, the rest he is correct on.
that depends on state to state here. best to advise based on strictest known policy. if you're wrong, its just better for them lol
Why not sounds like a great idea. You should’ve done it yesterday bud.
Some people don’t have money so they cannot buy a house or get whatever they wanted!
I got a construction loan to build my own house while not being a contractor. I guess it changes state to state
in some areas it is harder to get a loan when you self contract
Texas?
Same with my state . Just talked to bank and I can act as my own contractor.
What states are y’all from ?
Don't blame the contractors. They can't get help. Im a handyman and have had people approach me to build. Im one man. Good luck. Waiting for the market to crash before i do anything myself.
How you going to build a house unless your a contractor? You have to have someone inspect all the jobs from plumbing, electrical,
Roofing, etc.
Contractor doesn't perform the inspections. The state and local governments do that.
so there's actually a lot you can legally do without being certified. framing, plumbing, and most of the electrical. you can run every wire in the house from start to finish, but not connect the ends. a licensed electrician has to connect the ends, and you have to find an electrician willing to finish what someone else started.
it's not easy and you have to know a lot to do it, but it's possible
@@bradhaines3142 What state do you live in? In Tennessee, some of the bigger counties or cities could be different, but in Tennessee you can do everything on building your own home from start to finish. 100% of everything, walls roof, concrete, electrical, plumbing, flooring, meter base, main panels, all of it. As long as it's going to be your primary residence. And you can do it again 2 years later.
ETA- your bank may not let you do some of those things
Market highs can sometimes be followed by corrections, but predicting the timing and extent of it is challenging. I've heard some analysts talk about a 'massive' correction. It makes me wonder if it's time to adjust my $2M portfolios or maybe even consider some defensive investments.
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions. Alternatively speaking to a certified market strategist can help with pointers on equities to acquire
I agree, having a brokerage advisor for investing is genius! Amidst the financial crisis in 2008, I was really having investing nightmare prior touching base with a advisor. In a nutshell, i've accrued over $2m with the help of my advisor from an initial $350k investment.
impressive gains! how can I get your advisor please, if you dont mind me asking? I could really use a help as of now
Just research the name Angela Lynn Shilling. You’d find necessary details to work with a correspondence to set up an appointment.
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her..
Well this ain’t happening 😆
I don't see building a house as more expensive than buying one. Especially if you're talented.
I've learned that 90k is not enough to get a 15 year loan for 80% of a 300k build at 25% gross income.
300k is too much. You have to find something way below average. Might have missing windows and holes in the floor and ceiling.
Good luck finding a contractor to build a 1500 square foot house besides all the other craziness and she's got to be approved
Wonder why he only makes 90k as a fullstack. I make 180k as a Front end developer. He may need to look for a better job to help with the expenses
Depends on location. Which city are you in?
A whole year to find a job as a Software engineer? He probably wasn’t keeping his skills updated.
If you’re already working 80 hrs a week in a specific technology, hard to be on top of every other skill out there outside of what your current job requires
@@ds3602 You have a bad job if you’re working 80 hours per week regularly as a software engineer.
@@cw5948 Are you in the field? It's notoriously terrible for work-life balance.
@@ds3602 I am in the field; I work for a FANG as a software engineer, and I work roughly 40 hours per week. My experience does not match what you are saying. Obviously, there are tech companies that take advantage of their devs, but that is not the norm for any decent tech company since the demand for software engineers is so high they know their devs will leave if mistreated.
Agreed something is off here good Full Stack devs don't stay unemployed for a year unless by choice & they also make more than 90K.
wonder how long before he gets outsourced
Can I get the construction loan and build it my self from scratch I do not want to hire nobody for it
I'm avoiding the construction loan.
Selling a paid off house and trying to cash-flow the house.
Current estimate is I should have 1/3 of the sale price of hose left when the new house is finished.
That leaves me a good buffer for unexpected.
Houses are the biggest scams
Joanna Montana
Caller: "I did call a contractor..."
Dave cuts her off with "Call my mortgage people" 🤣
That's not exactly how it went but everyone perceives it differently
Jeez this caller doesn't have a clue..
Oh...
Cmon Boomer
Just get to your usual response
"Work overtime"
"Deliver pizzas"
"Beans n Rice"
Whats with the delay?
Asking Dave anything on new home construction is like Asking a fish about quantum physics.
Is he completely wrong? Please, enlighten us.
Yes please elaborate and be detailed on your point of view on how to do this. What's your take?
How so if he’s actually been through the home construction process multiple times?
pretty sure this guy was talking out his rectum
🙏✝️
Dave is recommending that way too many middlemen get involved. Build the house yourself after you save your money and develop the skill set
Joke’s on Dave, I got a construction loan without being a “contractor”. Almost done with the house
Can you share more details on that? My husband is a licensed general contractor and in Wisconsin we have to have 20% down to get a new construction loan to build it ourselves, using our business. Might be different by state?
@@Daffodils2Daisies I did have to put 20% into the project. We’re in Missouri
Good luck with your "do-it-yourself" slapped together house. Hope you got all the proper permits and it doesn't fall down in a few years. Unfortunately, there's always some "smart guy" that thinks he can skate around the system.
Congrats on that! My husband and I want to do the same thing…. And use subcontractors to do the things we can’t do. And yes, of course get all the proper permits and inspections….. do you mind me asking what companies will finance an owner build ?
@@starlasewell1882 our bank is mid Missouri bank. Not all banks will loan to an owner builder
Good luck building a house in Missoula Montana for 300k..try 700k
You completely lost her as soon as you started talking fast lol
I bought land but no home hmmmm interesting
That happens a lot.
What people don't think of when doing this is getting electric, water and sewer set up. that can cost almost as much as building the house itself. then there's the driveway. Just gravel driveway is appx $20 a foot. in material. Pretty high maintenance driveway.
I selected a second choice site for my new house due to cost of 1200 ft driveway vs of 75 ft of driveway. (same parking areas not included)
@@fhuber7507my plan is buy land, then save to do concrete, save up again for the house itself
Sounds like she does nothing. I sense a divorce in their future
Dave: *Breaks down the question relatively thoroughly and provides a satisfactory answer. Then tosses a lay-up to Rachel* "Rachel just built a house..."
Rachel: "BuIlDiNg A hOuSe Is FuN" *proceeds to prove she is nothing but a nepotism hire for Dave Ramsey*
Lol, she's great giving housewives advice on tips and tricks for groceries and buying household items, but she ain't good for much else. Oh, and she has great Instagram Reels lol.
Actually she advised to the caller that she will have a part time job which is spot on. One needs to check in on the construction every day to do it right.
I’d hire my daughter in a heartbeat if I had a financial show. All this “Rachel is this” snide remarks is exhausting. 🤣🤣
Read Smart Money Smart kids and get a glimpse on how “nepotistic” it is to be Dave Ramsey’s child. 😂.
This caller is not genuine; she could afford a decent phone if they had 90k a year.
This is just false. In BC we register as a builder owner which puts the liability of the construction on me for 10 years. I have to either A build it myself or B manage all construction of the house. I am able to get construction loans no problem. Dave is smart, but he is the most biased non thinking outside his little bubble man I've seen.
Dave comes off as a hater
She makes this nearly unwatchable
Sell the land and buy a cheap condo, if you can find one, and call it a day.
fuck that. why would i want to 'own' an apartment. that's just dumb. also no room to expand into other things. cant add a room, cant get a shop or garage built. they just suck
Sounds trans
How about we quit building homes and leave the land for other species who consider it their home.
🤯