Found a construction company but still have financing questions

Hello,

it's slowly getting more concrete for us as well, we have finally found a construction company that we like and our gut feeling is good.
We also have a plot of land, which is not 1000% our dream, but is okay given the circumstances here.

Now I have 3 questions:

1.) When do I buy the plot? Immediately? Or only when everything is fully planned with the developer, so that I can finance the plot and the house at once?

2.) Overall, it will be quite tight for us because we don’t have much equity and also not a huge amount of equity. If I can trust the calculators on the internet, it will work out.
Nevertheless: should we FIRST start by approaching the banks to see what is possible at all, or should I rather go to the banks with a concrete offer from the developer? Our construction company advertises, among other things, that the houses are gladly financed by the banks because they have a high resale value (half-timbered houses).

3.) How and where does one start? Preferably directly to the banks or rather an independent financial advisor? What are your best experiences and how many banks does one have to approach?

Thank you very much!

Hello,

things are slowly becoming more concrete for us as well, we have finally found a construction company that we like and our gut feeling is good.
In addition, we have a plot of land that is not 1000% our dream, but is okay given the circumstances here.

Now I have 3 questions:

1.) When do I buy the plot? Immediately? Or only when everything is fully planned with the builder, so that I can finance the land and house at once?

2.) Overall, it will be quite tight for us because we don’t have much equity and not huge equity either. If I trust the calculators on the internet, it should work.
Unfortunately, you can’t really trust those calculators because most of them are run by financiers who want to sell their products.
If it’s already quite tight now, it probably won’t work out. Sorry, I’m a pessimist, but unfortunately, optimism doesn’t finance a house. What numbers are you working with? Maybe you can mention your income and equity. Here are some (construction experts, for example) who can pretty well estimate whether a building project can work.

What many people often underestimate... including me at the beginning... are the additional construction costs... house cost: 200,000, incidental costs (including kitchen and garage) already almost 70,000. And the outdoor area is not even paved yet. Then there’s the plot... so all far from some advertising offers in the newspaper... I once read: €160,000 for your turnkey dream house... flat out lying, never works.

Still: should we FIRST start canvassing banks to even see what is possible or should I rather go to the banks with a concrete offer from the builder? Our construction company advertises, among other things, that the houses are gladly financed by banks because they have a high resale value (half-timbered houses).
That is seller’s nonsense. The house provider has a big interest in selling and just tells you what you want to hear.

3.) How or where do you start? Better directly to the banks or rather an independent financial advisor? What experiences have you had and how many banks do you have to canvass?
I would do both in parallel. I was disappointed by my house banks and had really great success with an independent financial advisor and broker. Asked the same banks and got much better conditions.

Thank you!

I wrote in red. Maybe you can give some info to help more concretely.

Hello,

1.) When do I buy the plot? Immediately? Or only when everything is fully planned by the builder so that I can finance plot and house at the same time?

With most plot sellers, you can get an option for a period of "x"; some do this for free, some charge money for it, and the reputable ones credit it against the purchase price if you buy the plot.

2.) Overall, it will be quite tight for us because we don't have a lot of equity and not huge equity either. But if I can trust the calculators on the internet, it will work.

The objections of my preceding poster are justified. Find an "independent" mortgage broker and discuss your building project with him. If you don’t find one (not the birds from the TV commercials please!) and Krefeld is not too far for you, I can also give you a recommendation.

Still: should we FIRST start by going from bank to bank to see what is possible at all, or should I rather go to the banks with a concrete offer from the builder?

For any reputable financer, an offer for a part of house "X" is sufficient. When it gets concrete, of course the signed contract including all annexes must be submitted.

Our construction company advertises, among other things, that the houses are gladly financed by banks because they have a high resale value (timber-framed houses).

Oh good, my eye color is blue-green, gray, brown, and yellow (really). No, seriously, whether this "advertising promise" is true can also be explained to you by a reputable financing advisor; he knows the lending limits and resale values of almost every provider!

3.) How / where do you start? Better go directly to the banks or rather an independent financial advisor? What have you experienced as best and how many banks do you have to visit?

1. Option the plot
2. Obtain an offer if your gut says "yes,"
3. Check the provider if your gut is right
4. Simultaneously visit a mortgage broker
5. Negotiate the building project with your house bank
6. Ask a second bank for an offer

Kind regards

Grrr, I had just responded in detail, then the response disappeared. What a pain. So here’s a brief version again:

First of all, thanks for the honest answers. I think the skepticism is good and justified, but I also want to admit that we are willing to make compromises in favor of owning a home (e.g. carport instead of garage, simple landscaping, we could bring our kitchen with us, etc.)

Here are some details:
We are 33 and 35 years old with 2 children, family planning complete.

Income: She: 2100,- (2400,- would be possible with overtime, but since I have a tough job and otherwise hardly see the kids, I actually don’t want more).
He: currently unemployment benefits, from May initially 400,-, trend upwards because it’s only a temporary job.
Child benefit: 370,-

Total currently 2870,-, with an upward trend or if I want then 3170,-.

Equity approx. 20,000,-.

Land costs 40,000,-. (450 sqm, plus about 80 sqm access road, which is “free” but must be paved.)

House offer around 180,000 for 150 sqm including foundation slab without floors and painting, with gas boiler, without underfloor heating (we both don’t like that). We would like to contribute 10,000 of that as [EL].

We hope we can manage with 260,000.

We would like to spend a maximum of 900,- monthly, the term can be 30 years as long as additional repayments are possible.

Is it maybe possible to save a few thousand by awarding trades to local companies?

Oh yes, about the construction company: it is a small family business from the new federal states, building about 5 houses per year. I had the site manager show me a shell and a finished house and was simply thrilled (my stepfather too). The client of the finished house (very trustworthy people) recommended the company unreservedly.
My gut feeling is very good. Oh yes, by the way, it is a half-timbered house! Bricked.

So, I think that’s it for now.

Now come 2-3 IFs:
If 260,000 is enough for you and if you can cover your entire living expenses with €1000 and if you can live with paying about 700,000 for your house, then it can work.

Let me explain my concerns: in my opinion, 180,000 is quite little for a brick-faced house, especially if it is that big. However, I am not familiar with solid construction. Have you already checked the construction and service description, i.e. the contract specifications? What is included?
Base plaster?
Exterior plaster?
How many sockets?
Which bathroom fittings?
Does the plot have a slope?
Have you done a soil survey? (Here a big surprise may await: worst case, contaminated soil or non-load-bearing soil - pile foundation)
Is the plot lower than the manhole cover? (Keyword: lifting station or expensive filling)
Is the plot fully developed?
What does 80 sqm driveway mean? Is the plot far from the road? (If yes, then the connection costs for gas, electricity, and water will be enormously expensive. An acquaintance had to pay almost 30 meters more than the 12 meters included and therefore not €8,000-10,000 but a hefty €30,000.)
Paving 80 sqm will cost you about €5,000.
Is your job secure?
Do you know the ancillary building costs? (Here homebuilding companies like to quote €15,000-20,000, but the reality is €30,000-40,000 if you consider the above.)

Regarding financing: €900 monthly for a €240,000 loan without much equity over 30 years you will probably never get. As a guideline: we borrowed €250,000 at 3.5% over 20 years... monthly burden almost €1000 at 1% repayment. I would be very surprised if you get the same or better conditions over 30 years with €20,000 equity.

We are planning a similarly sized house and are now at almost €400,000 total costs, with the plot being €80,000 more expensive. And somehow the money still isn’t enough, the construction gets more expensive every day. Just today the soil survey price rose by almost €1,000. You simply cannot earn money as fast as you spend it :)

But after almost 10 years you should actually aim for 2-3% repayment, because if you run it at 1% for 30 years, you will be almost retired and still have about €130,000 outstanding debt (at a fictitious interest rate of 3%, which is very unrealistic). Special repayments help of course, but you also have to manage them... and I don’t see you saving €10,000 annually.

Please don’t get me wrong, I certainly don’t want to spoil it for you, but one should at least have thought everything through. If you then decide to take the risk, at least you are yourself to blame if it goes wrong. If I were you, I would definitely wait until your husband has a permanent secure job again. You sleep better that way. And in the meantime, save equity diligently; then the loans will also be cheaper.

Hello,

You are quite in love with the idea of building – I can read that from your various threads, but you are heading straight into your misfortune!

... that we are also willing to make concessions for the sake of owning a house (e.g. carport instead of garage, simple landscaping, we could take our kitchen with us, etc.)

A carport is just as expensive – or inexpensive, depending on the standpoint – as a comparable prefabricated garage; the access will cost you about EUR 4,000 (when using simple concrete stones) and the landscaping at least another similar amount.

Income: She: 2100,- (2400,- would be possible with overtime, but since I have a demanding job and otherwise wouldn’t see the children at all, I actually don’t want to do more). He: currently unemployment benefit, from May initially 400,-, tendency upwards because it’s only a temporary job. Child benefit: 370,-. Total currently 2870,-, with an upward trend or if I want then 3170,-.

Unfortunately, banks don’t lend based on tendencies; in my opinion, you will have to work more. Again: seek an independent financing broker .... BEFORE you sign any construction contract – no matter what the seller/client tells you!

House offer about 180,000 for 150 sqm including foundation slab without floors and painting, with gas boiler, without underfloor heating (we both don’t like it). 10,000 of that we would like to contribute as equity. Oh yes, by the way, it’s a half-timbered house! Brick-clad.

Then it is about 130 sqm of pure living space and the house – as a plastered half-timbered house on slab – should cost about EUR 195,000; clinker (brick cladding) about another EUR 15,000. Total EUR 210,000.

We hope that 260,000 will be enough for us.

House on slab – EUR 210,000
Plot – EUR 40,000
Additional construction costs – EUR 35,000 (I’ve posted the list many times)
Extras – EUR 20,000

That makes a total of EUR 305,000 and this estimate does not yet include costs for flooring, painting, and landscaping!

Maybe one or two thousand can still be saved by awarding trades to local companies?

No.

Oh yes, regarding the construction company: it is a small family business from the new federal states, building about 5 houses per year. I had the site manager show me a shell and a finished house and was simply impressed (my stepfather too). The client of the finished house (very trustworthy people) unconditionally recommended the company to me.

5 houses a year mean a profit of EUR 100,000/year if this is at least somewhat realistic and the "family" is supposed to live on it. That means with your numbers above, the house still costs EUR 160,000 to build (including all profit margins and security deposits for suppliers – a full EUR 1,100/sqm living space). Doesn’t work, doesn’t exist; unless they put up a shack for you (by the way, then it would be too expensive again).

And, just out of curiosity: I would like to interview the "very trustworthy people" :rolleyes: Why, I wonder, does everyone believe that houses from the eastern part of the country are cheaper than the market actually allows? And btw – why should one brick-clad a genuine half-timbered house?

My gut feeling is very good.

You should think about that again. Just my two cents :eek:

Kind regards