by Hope
This post will let you know where we are on our housing quest that I brought up in my Year to Build post back in February. I know many of you are horrified at the thought of me looking to build or buy a home while still in debt, and I totally get that on a financial level. But on a mom level, this has been a VERY hard pill for me to swallow. So here’s what I’ve been doing this past two months on this front. (Please note that this post is filled with links to additional information, but none of them are affiliate links, just wanted to show you what I’m talking about more effectively.)
First, I need to make it VERY CLEAR, that not a single dime has been spent on any housing ideas. I’ve spent a lot of time researching and meeting with people, but no money. So let’s make sure that is clear first.
As you know, I had an idea that our housing situation was going to change early year as I drew closer and closer to the idea of not purchasing the home from my dad. I immediately started with Google searches like “houses for $100K” and “building a house for $10K.” That brought me to the DIY sites for Yurts, which seem amazing and affordable, but awfully small for us. From there I researched RV living, bus conversion, tiny houses of all shapes and sizes and then finally stumbled upon this Steelmaster Quonset style home.
Arc House in East Hampton – read more here
And that leads me to where I began this year…with this concept and almost a year’s worth of research on building one in a cost effective, energy efficient manner. We are talking I am now full of knowledge on insulation (blanket vs spray,) heating (radiant vs heat pump,) efficient building practices, direction housing should face for solar, window efficiency and so much more. I mean lots and lots of data. I’ve even been reading up on building practices, being your own general contractor, etc. So when I posted the post in February I had a pretty good idea of what I wanted to do, what my budget was and the only uncertainties were land, and red tape from financiers.
I quickly found a lot I wanted in a rural area. It’s been on the market for quite a while, is already cleared (used as farmland) and well, I really fell in love during a tour. It just spoke to my soul. In fact, as I’m writing this, I’ve just received a message that the owners was to know if I am interested.
Financing a house, especially a build…ugh! I started with construction loans…20% down, and a 700+ credit score is pretty much across the board requirements. Yup, I don’t have it. So I decided to hunker down and really go hard at my debt, thus the 6 month pay off goal came into the forefront.
But then, during my late night ramblings across the internet, I found….the USDA Section 502 Rural Loan Program. The program was designed to reinvigorate lower income rural areas, supporting lower income families to get into modest housing. The county we are looking to move to qualifies across the board, and frankly, I couldn’t consider moving there if I didn’t homeschool. They will finance 100% with minimal guidelines of what type of housing you can build. I thought we were home free.
Through all this, I’ve been meeting with contractors and engineers and leaving each meeting a bit wiser and more determined that this was the right course. And so, two weeks ago, I went into a mortgage office to apply. And here’s where my dreams derailed quickly:
- Evidently I am an authorized user on one of my dad’s high limit credit cards – ding #1.
- They will not discount the car payment that my ex-husband is responsible for, meaning it counts against me in my debt to income ratio – ding #2.
- Underwriters don’t think they will finance this type of building because there are no local comparables – ding #3.
Obviously, issue #1 and #2, I can do something about, especially since I will be rid of all consumer debt by July. But #3, just made me cry. So last week, I took a week off from any thought of housing and every time I thought of it, I said a prayer asking for guidance. It was a hard week but good to step away and get some perspective.
So I’m back this week and I’m ready to start looking at housing from a different perspective. The kids and I had a great talk about it this past Friday night as we ate our pasta dinner before Little Gymnast state meet. So stay tuned for the next chapter of this story….
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
I’m confused as to why #1 is a ding – unless your father carries a large balance on the card or has missed payments. I was an authorized user on one of my Mom’s credit credit cards for years and was able to benefit from her many years of timely payments as I built my own credit score.
When loooking at buildings with a metal roof such as that – take into consideration how you’ll reduce the noise during a rain or hail storm. Having grown up in a rural area with similar type sheds, you’d be amazed at just how noisy that can get.
To be clear, I have no issue with your dream and research of home ownership. BUT I dont think its factual to say you havent spent any money on this over the past X months. First cost would be fuel used to look at lots and meet with contractors, architects, loan officers. But potentially a bigger cost was opportunity cost. If you have spent 100 hours over the last year researching, you could have spent that time either making money or finding clients to lead to making more money.
Not suggesting you should buy a home without doing any research but if you could have turned all that time spent into $x,xxx you could be that much closer to your goal.
Just a different look at the situation. And by all means if you think the research was worth more than perhaps it was a wise decision.
Just curious as to if you found any websites to estimate the building costs and detailed labor/plans. I’ve always dreamed of a non-conventional home in the mountains!
I am fully supportive of the dream/vision, but argued in my comment last time that it seems like this timing is way off. Having just gotten a handle on your debt, I still think you need time to consolidate your gains. This plan, no matter how intricately thought out, seems to require a substantive financial commitment that seems unwise.
I don’t know the particulars of course, but this seems clear even from what you’ve sketched out for us:
1. If you don’t have 20% saved up, it doesn’t matter what program enables you to get a loan, you are still making a non-conservative, and I would argue risky financial decision.
2. Even if you had 20% saved up, I would argue that should be your base to ensure stability in the near/middle term. In other words, you should really be looking at saving 40-50% before you get started on this.
3. Of the three points mentioned in your loan denial, only #3 is really a legitimate reason that would be encountered by folks with rock solid financial situations. In other words, the fact that they brought up the first two tells me that this is seen as a risky financial play.
4. Perhaps you’ve thought of this, but by moving out to a very rural area, you would be losing a lot of your homeschooling “infrastructure”. (Libraries, parks, activities). Not to mention other potential financial implications (increased gas, utilities, etc).
Again, don’t want to be a downer, but please consider solidifying your financial position before embarking on this!
I am glad that you are doing research before committing to a new housing plan however I am very surprised that you did not know the ramifications of carrying your ex’s loan. YOU alone are responsible to the creditor for this debt. And anyone offering credit will take that into account. You have mentioned that he has generally held up his end of the bargain but you have given him a lot of power over your life (and all of your children’s lives) via your credit. It’s a big deal. Maybe as part of your educating your children on money matters you all could do some work on credit and credit score.
On the plus side all of the research you’ve done will make you a better homebuyer and homeowner. Knowing how your home “works” is a pretty big deal. So I think all the time and energy you’ve spent on research was worth it.
On the downside I have to agree with others that the timing simply isn’t right yet. I’m relieved, honestly, that you were turned down for the loan. I think you need more time under your belt with your new financial habits before you should take on such a huge project. You may think you’re ready, but the reality is that something unplanned will pop up, and you need to make sure you have enough of a financial cushion to absorb any surprises. Also, even if you were just going to buy the land and not build for a few years you’re still taking on risk. There’d be taxes, liability concerns, etc. I know this is your dream, but please, WAIT. You are thinking with your heart on this one, and you need to be patient.
You are absolutely right. My heart tends to get in my way alot. ALOT!
Wow, you like living on the edge. Slow down a little, your chicks are not near ready for counting. Your surprise at those 3 little items bothering the bank is proof enough that you aren’t near ready.
Agreed.
Actually, I am surprised because 1) EVERYONE I spoke to in the past said that as long as my divorce decree made it clear and he had cancelled checks to prove payment, that monthly payment would be discounted; 2) I haven’t been on my father’s cc since my honeymoon. Yes, we confirmed that with the bank. So why the mortgage company made an issue of it we don’t know. They last reported it in 2008. It doesn’t and hasn’t shown up on my credit report for other purchases I’ve made; and 3) I went so far as to speak directly with the USDA program manager for the state of VA while I was doing my research…told him exactly what I wanted to do, he never indicated that a steelframe home would be an issue.
And that #3 is the only one I have no idea how to deal with.
I am curious what the cost will be compared to your current rental? How much do you estimate you would pay in a lump sum, and how much per month in this newly built home? Try not to be too optimistic – I’m sure you know that most contractors underestimate to get the job.
How much more will it cost you? Or will it cost more? I suppose maybe not, but I would be very surprised. Curious as to the effect on your budget.
The proposed mortgage would be a bit less then I am paying in rent now…about $80 less.
No water bill (well,) no waste (septic,) same internet for work/home, electric?? I don’t know, it would have been quite a bit bigger than our current 900 square feet, but still only one level and build throughout as energy efficient and with fans (which we don’t have now.)
Some valid points have been brought up regarding rural living. We moved from a suburban area to a rural area 3.5 years ago. Here are a few things we have learned since the move. Our electric costs are the highest in the state and we had a rate increase 14.5% last year. We rely on wood heat and were not significantly impacted, but others in the community have been. We were gifted several years worth of firewood by our neighbor for not complaining when he logged his property but will still have expenses for fuel and maintenance on the chainsaws to process the wood. Our cell phone bill is huge because a landline that is only free to call local numbers is too expensive to justify. We use our cell phones to Hotspot for Internet access so we can be connected and my husband can work from home if need be. Satellite Internet is available (and subsidized ) but is limited as to how much you can use and is slow and sometimes unreliable. Depending on you location and climate you may have some increased “survival” costs. We are out of the flood plain, but if there is another flood event or heavy snow it is possible for us to be stranded for a week or more. We have to always be prepared with extra food and fuel for the generator. If the power goes out it will most likely take much longer to repair than in a urban or suburban area. You must plan ahead for food and meals. Rural markets are more expensive, do not always have what you need and are not open 24 hours a day like urban/suburban markets. Commuting costs are higher- fuel maintenance and time.
I love where we live and would not change our decision to move, but would have planned better financially had I know more fully what we were getting into.
By going rural in this case, we were really just moving 15 miles away from our old house. So our lives would continue as normal with literally just a 10-15 minute additional drive…thus ideal.
The idea of being stranded does not bother me. I’m such a planner that could deal with repercussions of being stuck at home….as we did alot of this winter.
I think it’s fine to daydream and research, but your research should show you that you need a little more time to strengthen your finances. We really want to move as well, but it’s not a smart decision right now, so we track real estate sites, look at pictures of houses, and so on. There are so many sites out there to look at home decor and landscaping and things like that. Try to get your fix that way!
You are very right, KLM. That’s why I started the post with the fact that it’s really taken me a bit longer to face that reality. But I am firmly planted there now, and dealing with giant tidal waves of emotion as a result. More to come on what will happen next.
Never buy a home when you are broke – it will end up being your worse nightmare. You sound like you are more than broke. Follow Dave Ramsey’s advice on this. Actually I find it a bit surprising that you blog for this site, it seems that you are more interested in accumulating rather than eliminating debt. Anyone who seeks to get a 100% loan is not interesting in getting out of debt. That may sound harsh, but you seem to be going in the opposite direction of the other bloggers. Im sure your living situation is not optimal, but a reasonable solution would be to save and upgrade to a better rental situation.
Unfortunately, going to a better rental situation seems silly to me. The rental market and buying market is INSANELY expensive where I live. And by buying just one county over, I would be saving a huge amount of money. I am already paying more than what my mortgage would have been, and for far less.
Show me a bank that does a USDA construction loan. They do not exist. That is way too much risk for any bank. USDA will finance the end loan but you still have the construction portion which calls for 20% down. Also, USDA does not consider new construction modest housing.
You are right, they will not do it as a construction loan but they will allow you to build new housing. Believe me, I have done the research, backwards and upside down from the top to the bottom.
I even told them what I was doing and they said it was okay…just when I went to the underwriters did the steelframe become an issue.
If this plan and the land is your dream goal you can still keep working on it. When your hear this set on something it can be hard to focus on anything else. It can be so disappointing to get so close and have something like this happen. Just like your other situations of selling the van or the house your dad owned presented some challenges that you overcame, this is no different. You now know that traditional financing won’t work. Maybe you can go about it in a different way now. Some land owners are willing to finance you themselves. And maybe you can trade some of your skills to the contractors you’d plan to hire for this project.
So what would you have done if you’d gotten approved for the mortgage? Taken it on? I know it must be hard to wait for your dream and I think a lot of the research and planning is understandable. I share the others’ concerns though about really being excited for this next 6 months of debt payoff and hope you can stay focused on that!
This is not to discourage you, I think a house is a great goal! We looked into building a tiny house or an arch house a few years ago. After lots of research on them it turns out they are a pretty poor investment (they depreciate like crazy and don’t gain any value like a standard home). So if you were thinking about this in the sense of a financial investment I would say it’s a bad one. But if you’re just looking at it for a place to live and gather a family then it has plenty of value!