Financing and Permits.
Log Home Project Financing.
Before you get into a whole lot of checking into the finance side you will need to have your labor organized, here are a couple of ideas and options, this will concern anyone, not in a construction trade and anyone new to a location that they didn’t grow up in or doesn’t know where to go for good local help, outside of the norm of finding trades in the paper, phone book or social media, you can look at projects in progress and if you like what you see, stop and ask them if they would like to give you a price ( I got my mason this way) ask neighbors who they know and might recommend (the word of mouth method) another place to look and ask is at the local grill where most tradesman go for breakfast somebody always knows somebody.
A good one to find is the semi-retired still able and wanting to work, these guys don’t charge as much as actual contractors, my electrician was one of these, he charged me by the hour and was half the price of the going rate for electricians. One to be aware of is the highly recommended one, if these guys know they came highly recommended they might charge a little more than others might, so be sure to let them know you will be getting more quotes for the work, and don’t tell them who the competition is. (trust me on this one)
So now you have some quotes to approach the lenders with.
It all starts with the construction loan that will turn into a mortgage at the end of the project Also called the construction to permanent loan. The advantage of this route is you only have one-time closing costs Vs the standalone construction loan This one will have 2 sets of closing costs one for the loan to build with and one for the mortgage at the end to pay off the construction loan.
This is another shop around for the best deal process that you need to do, I found it better to stay local given all the paperwork involved. A good place to check with after you have the bank or mortgage lender figures is to check with some local credit unions, they can sometimes offer you a better deal than the banks and be a little more flexible on the time limit, but all of them will have the same valuation process.
Once you choose the loan company you want to go with and get down to the paperwork, your plans will be sent out for an appraisal to get the fair market value of your home.
As I mentioned earlier Appraisals will vary according to location and local market conditions, also try and include a list of the kind of materials you will be using in the home, this also affects the appraisal, (custom trim has a better outcome than standard off the shelf materials).
It will pay you to have your estimates/quotes together ( An actual quote is better, as it ties the contractor to a set price) with you from contractors for the work you will not be doing yourself, it might not even hurt to get an estimate for the work you will be doing yourself.
This will confirm all the numbers for the project, it will also give you a better idea of what your time is worth and how much you will be saving. And will also give you the build cost for a comparison with the appraisal to give you a better idea of the (80/20) loan to value aspect of it.
Also, depending on the conditions of the loan I think you can include labor costs for the work you do undertake yourself, this way you still have some income (well worth asking about), You will need to include permit costs in your numbers, give the building/planning dept a call and ask how much an owner-builder permit will cost along with all the other permits that you will need, I’m sure they change every year and are based on the size of the home.
For a better understanding of what these loans are about and how they work, I did a google search for New Home Construction Loans and found that lending tree had a really good detailed outline on the whole workings and process.
Most lenders will also require some collateral, it is usually the 20% equity margin.
Again depending on your financial situation, if you own your current home with some built up equity and plan on selling it, a thought came to me that may be an option to you, is to do a cash out line of credit with your current lender to cover some or all of the upfront expenses, ie: Land, lawyer, survey, permits, closing costs, deposit on the log home kit, etc. Anything to get the 20% loan to value margin.
Construction loans are like the building permits, you have about one year to complete the project depending on where you go and how flexible they are (ask questions) my lender would have gone to 15 months. In addition to all this, lenders will also require you to have some kind of construction liability insurance for the project and will probably need proof, this is to cover you for anyone you hire and has an accident or gets injured during the build, I found out the hard way that it does not cover the owner for accident or injury, (check with your current home-owners insurance to see what kind of coverage you have or need).
So be sure you can finish in time, We knew our project would take more than a year to complete so we didn’t go that route, our project took 4 years to complete. All will be explained later as we go through the construction stages.
Applying for an Owner Builder Permit.
Based on the assumption that every county in every state may have a slightly different set up as to where to go to get your building permit for the construction, and the health department for the well and septic, fortunately, mine were in the same building, I don’t know if this is the case all over but it made sense to me to have them 50 ft apart, so don’t forget to ask questions if you are not sure where to go for these, I had to ask the guys at zoning where to go, this is also a good place to ask what your address is if you don’t know it yet, as they were first on my list of people to see to get the copies of the survey and confirm the zoning, these I needed for the building dep’t anyway.
The following information pertains to Sampson county, NC
What the Plans Should Include.
The following are site plan requirements for residential building:
Foundation/first-floor framing plan with:
- Specific wall footing width and depth of pour.
- Detailed foundation wall size and construction type.
- Wall construction size and type of construction.
- Floor slab details.
- Pier and footing sizes with dimensions for their location and spacing.
- Girder sizes and locations, floor joist direction, bearing, size, spacing and species.
- Foundation vent calculations, and foundation access door size and location.
- Anchor bolts are required at all foundations and must be shown on plan.
Floor plans with:
- Location and size of walls, windows, doors and stairs.
- Beams and headers, with supports and attachments.
- Ceiling plan with ceiling joist directions, bearing, size, spacing and species.
Roof framing showing:
- Direction, bearing, size, spacing and species of rafters as well as special ridges or support for vaults, cathedral areas and valleys.
- Roof vent calculations and roof coverings.
- Truss layouts are required when manufactured roof trusses are to be used except for the simplest roof designs.
- Insulation values for floors, walls and ceilings for conditioned spaces.
- Attic access, elevations, and calculated areas for finished floor spaces and garage.
- Fenestration calculations are required and must be provided on all plans with conditioned spaces. Structures with more than 15% fenestration must show method of energy compliance per North Carolina Energy Conservation Code Chapter 4.
- Mean roof height or assumed mean roof height must be stated. Design values for cladding must be provided based upon mean roof height.
This information is courtesy of the Sampson county building department.
The above information should all be included on the plans that your log home supplier is providing you with.
The Application. Getting the permit is pretty straight forward, you just need to fill out some forms and hand over the money, (permit prices will vary by county and state and are based on the size of the project) but be sure to let them know you are doing it as an OWNER BUILDER.
This is also where you will need a copy of the survey and plans to leave with them for what I call plan check or red line, depending on where you are, on the survey you will need to mark exactly where the home will be located on the property and be sure to keep a copy for yourself.
Don’t forget, as an owner-builder you will be required to be there for inspections, or the inspection will result in a failure and the inspector will have to come back (they don’t like doing that) and too many failures will cost you more money.
While your at the building Dep’t getting your permit, find out who your inspector will be, when he is available, because you will need to go back and go over your plans with him to see if he made any changes, Now is a really good time to ask as many questions as you can think of, (have a note pad handy at this point) and it will also give you a firsthand idea of who you are dealing with. (remember he can be your best friend or your worst enemy).
One thing I have found in my time, is the bigger and busier the office is and a town that has a large volume of construction going on, you may not get to meet your inspector until your first inspection is ready and you will probably just be handed back your plans with or without changes and be told they are approved your good to go.
My building inspector was Available from 7-7.30 a.m and after 3 p.m, what I would do if I had issues about a building code that I wasn’t sure about, I would go see him and ask questions to make sure I was doing the right thing or if I needed to do something different, it was a lot easier for me to do that, than try to figure it out on my own and be wrong, or try to explain it on over the phone. It also showed that I had a lot of respect for him, and I think he appreciated it too.
Below is a list of required permits and inspections that you will need under the owner-builder permit. To help you better understand the owner-builder permit, this will cover the building/structure up to the roof, in addition to this you will also have to have Well and Septic, Electrical, Plumbing, Mechanical and Insulation permits.
Well and septic, Permit, and inspection, from the health dept.
Electrical. 2 inspections
Plumbing. 2 inspections
Mechanical. 2 inspections
Final inspection. Certificate of compliance/occupancy.
To ease any stress you may have about this process, a good licensed contractor will usually help you out with a lot of this and get the permit for you, if you have questions, ask him if the permit is included in his price.
As an owner-builder, you will be responsible for the following.
Scheduling required inspections.
Paying suppliers and sub-contractors.
Job site safety.
Supervising the build. Incl scheduling contractors.
All record-keeping and accounting for the whole project.