FIFTH STEP: Find a New Property

Around this point in our plans our realtor let us know that someone else had purchased the property we had been planning on. Oddly enough, we didn’t really mind. It was inconvenient, yes because we had configured our house plans around this property, but it had felt like a property we were buying because it checked all of our boxes. It never felt like home, no matter how many times we went to see it.

As we started looking for land options again I had one thought come to mind over and over again, “The lady at [building company] said there were some lots for sale in [small town].” The thought came to me over and over again so I asked our realtor to get me some info about any lots for sale in this small town.

Quick side note: this place is about 30 minutes from our current home, which means it’s about 30 minutes from a grocery store, 30 minutes from family, and 30 minutes from a pizza place…when I say small town, I mean small town. It’s a farming community that is close to the mountains and although I’d grown up driving through or past it, I’d never had a smidgen of desire to live there.

That being said, I kept thinking about this subdivision I’d heard about and Curt and I drove out there to look at lots when our realtor sent us the info for them. There were three lots available and one of them was our home. Curt and I both agreed that it was perfect. We asked our realtor to draw up the papers and he did. The sellers of the property understood that we couldn’t buy the land until we got our construction loan from the bank, so they asked for $500 down to hold the property. Something really interesting to note about this whole process: with the first lot we found, we totally dragged our feet…we moved so slowly and un-enthusiastically. We were excited about our house plans, but not the lot. So when we didn’t get that lot and found our other one, we realized that things had worked out the way they should because we needed to find the lot we now have. We saw God’s hands helping us settle us where we need to be.

Because of Covid-19 things have been moving pretty slowly with the whole process of getting our loan finalized (I’ll describe that more in a moment), and we’ve had to move the closing date for the land three times. Both times the sellers asked for more money down to make sure we are serious about buying the property. The second deposit was $1000 and the third deposit was $3500. All of that money will count towards the purchase price of the property.

SIXTH STEP: Financing

Really, this step could be at the beginning because we’ve been dealing with it since we started looking for a house, but this is the point for us when we got really gung-ho about our financing…and oh boy! it is quite the process.

We made the decision early on to keep our current home as a rental if that was at all possible. Because of this we needed to refinance our current home in order to 1) have money for a down payment, 2) lower our house payment because we’d need a lower payment to make a good income when we turned it into a rental, and 3) we wanted the payments lower because we knew we’d need some money to use towards the down payment for our construction loan during the building process. Because we were working on this process during Covid-19 it took quite awhile, but we eventually got our house refinanced. We had the money we needed for the down payment on our new house.

During the process of getting our home refinanced, we were also constantly working on getting the construction loan figured out. There were a lot of papers we needed to gather…we had a list of 15 different things we needed to send to our loan officer.

*I must say, the pandemic has been a pretty crazy time to be going through this process because so many other people are doing the exact same things we’ve been doing. Because of that, every time we have submitted papers-to the bank for the refinance, to the loan officer to get our new loan, or to the draftsman to get a few things altered-our stuff goes to the end of the line and we have to wait for the people helping us to make it us. Fortunately we don’t have a deadline as to when we need to be in our new house, so it’s worked out fine for us.

This past week, we finally found out that we have approval for our construction loan, which means we’ll probably break ground on our house in less than a month!

Here are a few things to know about construction loans: 

1. They’re very similar to a regular mortgage in that you can get a 10, 15, or 30 year loan. The interest rates are also very comparable.
2. The loan officer at our credit union had originally asked for a down payment of 9%, but in order for us to keep our current house AND get a construction loan we are actually putting down more. The reason the 9% wouldn’t work is because when you’re applying for loans, the loan officer will look at all of your debt and if the percentage of debt compared to your income is too high, you have to either get a smaller loan or pay more money down.
3. When you have a construction loan, you start paying on the interest of what your builder has paid for from the first month onward, until you move into the house. This means that for us, as soon as the excavator comes and digs the hole for the foundation and the septic system, our builder will pay the excavator through our credit union, using our construction loan. We will then start paying towards the interest of that payment each month. Therefore, at the beginning of the build we will pay a much smaller amount than we will towards the end of the build because the amount taken out of the loan will increase as our builder uses more and more of the loan to pay the subcontractors and purchases materials for our house. After you move into the house, the construction loan turns into a regular mortgage and you make a payment every month that is put towards the principle and interest of the loan.