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Comment by icebraining | Hacker News Reader

A problem is that you can't get a mortgage to build it yourself. Being cheaper in the end doesn't help you if you don't have the money right now.

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You can get a construction loan in some States and in those States you are allowed to build your own house. Now the bank may have some requirements (show them your plans etc...) on you but you can generally act as your own general contractor. Still I think a reputable builder + home inspector + real estate attorney is the better way to go. At least if the contractor is registered with the State you can usually get access to State funds if the GC screws up.

I have not seen a lender that will give an "owner-builder" a construction loan without being a licensed general contractor. There are various common ways to structure a deal with a general contractor - fixed price, "cost-plus", or construction manager (where you convince them to "use" their license and they check your work).

Several of my family members have gotten such a lot, so as of 15 years ago it was still possible.

Building your own house is a good way to get end up in divorce. It hasn't happened in my family but they tell me that the stress is too high. You have to get that house built quick because the loan terms only give you a few months before you have to refinance.

Or a remodel is a quick way to divorce as well.

Some of my fondest childhood memories are from periods of major DIY home rennovation projects. Remodeling the kitchen, replacing the windows, installing tile and hardwood floors, all sorts of fun and hugely educational experiences.

These were times of pleasure, excitement, and productive collaboration for the entire family.

When I see comments like these it makes me wonder what sort of dysfunctoinal marriages people have got themselves into, and if taking on any sort of project requiring teamwork is simply forcing a realization of an already failed state.

But was it a fun memory for your parents? I remember renovations being exciting too but the reality of looking after children with an unsafe house, no proper kitchen or bathroom etc, gets old really fast.

Good question, and I can't speak on their behalf.

All I can say is it didn't drive them to divorce, and they're still together to this day.

I like to believe living in a home surrounded by the fruits of those past projects has played a positive part in their staying together, especially long after the kids left the nest. But that's nothing more than romantic speculation on my part.

True. The barrier here is then convincing the bank to give you the construction loan. The big construction companies (in some states in the US) move through homes so quickly and have found ways to reduce the amount of material used in certain parts of the build. They don’t necessarily provide a better home than you could build yourself. If you have recourse against them due to poor workmanship then that sounds like a good option. Most people don’t have the desire and/or network to become their own general contractor (it’s definitely not impossible though). What would you be using the real-estate attorney for?

Enforcement of the building contract and also what to put in the contract. You will find that despite the written agreement, the builder or sub will usually cut some corners.

Owner-built homes rarely use banks. My experience has been the way to go is a mortgage broker who can get you private money. It's more expensive than banks, but it works.

If some places you can structure it such that the bank will give you x amount once y work is complete. Eg they give you 20k, and once foundations are signed off by the council (or whoever) the next install will be handed to you for framing or subfloor. On completion of that another amount can be borrowed. It’s a good way to go.

As I think about it (not in depth, though), does it matter? If you're building it yourself, you can't go that fast. The amount of building materials you can buy each month with what would amount to a mortgage+taxes+insurance payment each month would be just about what you could use up. So it would probably work out OK.

Land alone is often pretty expensive; can you get a regular mortgage to buy it?

Of course! And it's even lower risk because you can't really mess up land the way you can a house.

The land loans I've seen are not very advantageous, high interest and short terms; where are you getting them from?

Our land loan had similar interest to a mortgage, but was interest only with a balloon payment after 24 months. The bank's intent was to issue the loan and roll it into a construction loan with similar terms (which is what we did). This was all through a small local bank where the loan officer inspected the house himself prior to each construction draw.

The biggest challenge we had with the loans for land, construction and the eventual end-loan was "Why are you building a 1900 sq-ft house? You really shouldn't be building a house under 3k sq-ft."

I’d have called that a medium to large house with 3k being huge - what is typical? Looking where I live, we are typical for 1960s, and just over half the current average of 205 square metres. Guess my idea of large is actually small.

My father did as much overtime as he could to save up money when we were building.

A mortgage is not a requirement to building a house, but making that tradeoff will induce a number of constraints and require non-standard ways of living for a while that may be more than you or your family find acceptable. The main ones are being uncomfortable in the short term, and probably living in a rural setting where land is less expensive.

Here is a link to a book that lays out a very good strategy:

https://books.google.ca/books/about/Mortgage_Free.html?id=U8...

(warning: although I read this book and considered it's approach, I used a slightly different strategy towards home ownership without a mortgage that allowed me to purchase existing homes)

You cant get a mortgage for self build in the USA? - its a definite market in the UK and you can save quite a bit.

I'm not from the US :) By "self-build", you mean you actually build it yourself? Doesn't the bank require professionals who can present invoices and such?

Yes they require _someone_ to have a general contractor's license and insurance.

Most actually go a lot further than that. We're in the process of building right now with a large-ish builder + separate lender. We can't even do the painting ourselves, the mortgage company requires that we hire it out.

I'm short on free time anyway so it's not that big of a deal but finding a lender that would let you do everything is probably a bit tricky.

Finding a contractor who will take a few bucks under the table in exchange for putting their name on the paperwork and checking your work prior to code inspections is not usually that hard.

Those are both cheap and easy to get though.

In Czech republic they do offer self-build mortgages and you dont need any license (up to 150 sqm). Money are released by achieving milestones and inspection from bank, no invoices required.

You are in charge of the build typically you do some of the PM your self and hire contractors to do the heavy lifting - if you have the skills some do bits themselves

In the US, I know there is a sort of convertible building loan - you need to present the bank with a plan for something that will in short order be a house that can secure a mortgage. Once the house is complete with a CoO, it turns into a mortgage.

I'm guessing the loan underwriters will be uncomfortable with the risk profile of a decade long project of self improvement, but what do I know?

As I have said in an earlier note. Owner-builders use mortgage brokers who broker private money.

This is a good thing. You want any home you may buy to have been built under the supervision of a licensed general contractor.

$2k gets you a general contractor licence in my area (Canada). The fact someone is licensed means almost nothing at all for general contractors. Its more important they have insurance.

Don't they have to have several years of experience as well?

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