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Building Your Dream House – Part 1 Connecting the Dots
By Pat Cardoni
In this series of articles Pat Cardoni returns to the blogosphere to discuss the proven steps he takes when working with a client looking to take part in a custom home build or de-conversion project.
Welcome to the start of my second e-book. This time I am going to talk about the knowledge I have gained by buying, gutting, building and selling over 475 homes during the largest housing bust since the great depression. I am going to focus on the steps you as the consumer need to take to achieve your goal of building your dream house!
Connecting the Dots
One of the hardest items in building or de-converting in Chicago is putting the puzzle together.
Do you obtain an architect first or do you talk to the lender? What does the builder do? How about the Real Estate Broker? All of these are a path to construction. Which one is the most direct and cost effective way to build a home?
In my opinion, the most realistic place to start putting it together is with lending. Lending realistically sets the timing and direction of your project. It is a good idea to explore your financial options prior to engaging anyone in your proposed build.
Lending options will vary according to the final price of your project. If the total cost of your project is below $1M you will be expected to have at a minimum 15% down payment plus 6 months reserves to be eligible for a construction to perm or a construction loan. You will also need 680 scores and a debt ratio no higher than 43% . There are of course exceptions but the more attractive you make your financial situation the more likely a lender is willing to make exceptions on your loan.
If you go over $1M , you will be expected to have a 20% down payment. If you go over 2M you will need 25%-30% down depending on many factors. You will need 6 months reserves, meaning 6 months of mortgage payments in liquid funds, after your down payment money has been received. In other words, your lender doesn’t want you building your dream house with no leftover money.
Expect 90 days processing on construction loans. So if you are lot shopping or house shopping get your financial house in order before you pay anyone to design a house.
Talking about money is boring, and even taboo, I get it. Stay tuned for the next subject as we get into the discussions of working with architects and designers. Calling all HDTV Lovers!