The Pros and Cons of Buying Land To Build A Home

 

Owning land is part of the American dream. This does not mean that this is the right move for everyone. Here are the advantages and disadvantages of purchasing land for a home.

Here are three reasons why purchasing land would be a great idea.

You Can Build Your Dream Home

Who wouldn’t want to build their dream home? Purchasing land gives you the perfect opportunity to do this. Your home can be exactly the way you want it (provided the home plans comply with local zoning

and building laws). If you are licensed as a general contractor, then building a home will be a whole lot cheaper than purchasing a new construction home.

Diverse Investment Opportunities

Residential real estate is still a smart investment. Land and buildings are great real estate assets but the land is more versatile for investment opportunities. You can purchase land and sit on the vacant lot and resell it for higher price years from now. The land has little maintenance and appreciates over time with little done to it.

You Can Qualify for a USDA Loan

If you purchase land in a rural area, then you are able to qualify for financing with a construction loan guaranteed by the U.S. Department of Agriculture. This is perfect if you are going to build your primary residence on this land. Another plus is that a USDA mortgage will not require you to have a downpayment.

There are however several reasons why this would not be a good idea for many.

The Process Requires More Research

Building from the ground up can be a daunting task with a litany of things to do before you even break ground. You not only have to hire an architect and a contractor but you have to conduct soil tests, check local building codes and zoning regulations, obtain building permits, and make sure that you have access to underground utilities. Be sure to obtain a land survey to confirm the surface area you are purchasing. You do not want to have a dispute about your land’s boundaries.

You May Have More Options in Rural Areas

A lot downtown is worth a lot more than a lot in a rural location. In sought-after locations, you will be bidding against developers, investors, and other homebuyers for land. You will have better luck and more opportunities to purchase a piece of land in rural areas. This would not be ideal for a family with kids that need local amenities.

Getting a Conventional Loan May Be More Difficult

A lender will want to have tangible assets to use as collateral. Lenders look at land as a riskier investment than a home that is already standing. If a lender will give you a conventional loan, there will be very strict requirements. Some of these requirements might be a better credit score and a better debt-to-income ratio than if you were purchasing a home. Lenders might require a larger down payment and higher interest rates with a shorter repayment period.

If you are in between on whether to purchase land or a ready-built home, then a teardown might be right for you. A teardown will already have access to utilities and you will not have to spend as much time with permits as you would on a vacant lot. Check with your local Realtor who can help you choose the right path for you.

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2022 Southern Kitchen Looks

 Kitchens are the heart of the home and they are especially a big deal in a Southern home. Whenever people gather at home whether big or small there is always food involved in the kitchen. Southern Living magazine featured the 2022 Living Impressions™ Collection by Formica Group. In the article, they featured three different patterns for a kitchen’s surface countertops and backsplashes.

Modern Vintage

The sugar glass pattern is perfect for those who love old and new. The elements are of new and old design and will fit in almost any kitchen’s decor. Celebrity designers have dubbed this look as “Grandmillennial” or “granny chic.” The sugar glass pattern is described as a vintage-modern fusion. The company creates the look by scanning glass chips, milk, and sugar to create an exciting new tactile multidimensional pattern.  The sugar glass backsplash is a perfect fit for any color cabinetry.

Rustic Luxury

This look doesn’t mean an old rickety cabin in the woods. After the pandemic hit, bringing the outdoors in has become an even more popular trend. This look can be completed using natural materials and earthy hues. A great example is to use reclaimed wood on a kitchen island. Their Walnut Butcherblock

is a perfect pattern to use for this look. The farmhouse design has been a popular trend for years and will stay popular this year.

Marvelous Marble

Marble is a popular trend that can give your kitchen a sleek look. The new Manhattan Marble and the classic Mediterranean Marble pattern are perfect for this. They “offer a stunning interplay of white and light. Marbled Gray gives an “abstract and industrial” look and Slate Noir is described as a “little black dress” pattern.

Many of us have spent more time than usual in our homes and might be ready for a new look. Southern Living suggests looking at the 2022 Living Impressions™ Collection from Formica and ordering a free sample at www.formica.com/livingimpressions.

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The Next Generations Should Look at a Career in Construction

 

With the housing market so strong and the inventory low, it is no wonder that the construction industry is booming. Residential construction has tons of talented and creative people in the industry. This industry has great earning potential, job security, and room for advancement, which gives those in the industry a sense of personal achievement. This makes it a perfect industry for your children to consider in the future.

There are a couple of big factors to consider when it comes to your child’s future, education and career. These factors tie into both by gaining knowledge and skills and putting them to use. A good way for

your child to consider all career options is to experience Career and Technical Education (CTE).

CTE provides younger generations with the education and skills they need for college and careers. It also gives kids a reason to learn by taking real-world skills and knowledge in a specific field to focus on. There is a high demand for CTE. Ninety-four percent of parents support it, 86% of both students and parents vocalized they wish they had the opportunity to have received more real-world knowledge and skills at school. In fact, 54% of business leaders say the educational system does not implement CTE enough.

Remember there are plenty of opportunities in the construction industry. There are occupations such as carpenters, plumbers, and HVACR technicians that are in high demand. If college isn’t your thing, there are other ways to get to a good career.

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Your Home Projects Might Give You Energy Tax Credits

 

Tax season is here and many are scrambling to get their taxes done on time. There are many tax credits that home builders might be able to benefit from including the 45L tax credit for single-family and multifamily developers exceeding 2006 energy standards.

The 45L energy tax credit can be claimed the same year each home is sold or leased/ It can be on newly constructed and renovated homes and apartments. In order to get the tax credit, an eligible certifier must

perform energy modeling, testing, and certification. A home that is three stories or less is eligible. These can be single-family, manufactured homes, apartments, condos, and assisted living facilities.

Volume home building can also qualify for R&D along with the 45L tax credits. The homes must follow certain design specifications and activities. BRAYN Consulting, a company composed of lawyers, engineers, HERS raters, and accountants, can assist with these niche tax credits. The engineering staff at BRAYN can work along with your CPA firm to review, documentation, and substantiation of the tax incentives specific to your business.

Remember if you are a builder you do not want to leave any money on the table. A company such as BRAYN can help you with the tax process.

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Will 2022 Home Prices Still Surge?

 CoreLogic Principal Economist Molly Boesel reviels that the home price appreciation will slow down after last year’s surge. 2021 brought an 18.5% year over year increase in national home prices. CoreLogic Home Price Index’s data shows this is the highest 12-month gain since the index was founded in 1976.

 

“Consumer desire for homeownership against persistently low supply of for-sale homes created one of the
hottest housing markets in decades in 2021 and spurred record-breaking year-over-year home price growth,” Boesel said.

This year, Boesel predicts that the annual growth rate in home pricing will slow down each month and will average 9.6% for the full year.

Rent has also increased in single-family homes. Rent was up 11.5% year-over-year in November 2021.

“The November 2021 increase was more than three times the November 2020 increase, and while the index growth slowed in the summer of 2020, rent growth returned to its pre-pandemic rate by October 2020,” Boesel noted.

Now is a great time to purchase a home. Contact a local Realtor who knows the market and the area.

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The Impact Mortgage Rates Will Have on Spring Home Buying

 Looks like mortgage rates are going to rise and home inventory should start to pick up. Home prices are still increasing at a fast past and probably will continue through this year. According to First American’s Real House Price Index (RHPI),  affordability declined 21.0 percent compared with a year ago, as the growth in nominal house prices combined with the 30-basis point increase in the 30-year, fixed mortgage rate vastly outpaced the 4.4 percent increase in income. Affordability is likely to decline further in 2022, because both mortgage rates and nominal house prices are expected to rise.  Here is what this will mean for you in the Spring.

Fed Expected to Raise Rates Soon

The Federal Reserve has announced rate increases will come due to fear of inflation. The long-term

bond yields are also increasing and the mortgage rates usually follow the same pattern as long-term bond yields. The Federal Reserve is tightening monetary policy, higher inflation expectations, and an improving economy. The majority of economists believe the 30-year fixed mortgage rate will increase to 3.7% by the end of this year.

Rising Mortgage Rates Likely to Reduce Affordability

The Real House Price Index which measures housing affordability based on changes in income, interest rates, and nominal house prices, can help industry leaders determine how shifts in interest rates and income can affect homebuyers’ power and affordability. Let’s face it, an increase in mortgage rates will impact affordability. When the rates increase, it usually means that the economy will improve and there will be stronger wage growth. A higher-income can even the playing field when it comes to an increase in home prices and interest rates.

FOMO (Fear of Missing Out) or FOBO (Fear of Better Options)?

Homebuyers are continually watching the interest rates, and many are buying homes now in order to avoid further inclines in the rates. It is reported that the rates will increase steadily through the remaining months of 2022. Many potential home buyers have FOMO, the fear of missing out, on the historically low-interest rates. Buyers are jumping into the market and pushing the springtime surge. On the flip side, the springtime is the time a lot of sellers list their homes and this might put homebuyers into the FOBO, fear of better options, mode. There may be better home options out there even if the prices are higher.

If you are in the market for a home, contact a local Realtor who can help you with the home buying process. A Realtor can also find the best neighborhood and home for you.

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Is a Lot or Construction Loan Right for You?

 

There is not much home inventory out there right now and it might be a good time to think about building your home. If you are considering building a custom home, then you will need to obtain a different loan other than just a mortgage on a home. Here are the different types of loans that are available for those looking to build.

Sometimes you find the right lot or piece of land but are not planning on building for a while. If this is

the case, then a lot or land loan is right for you. A lot or land loan is a little bit harder and more complex than a standard home mortgage. There are shorter terms, a higher downpayment, higher interest rates, and more commitment and underwriting for you.

“Owners of raw land are much more likely to stop making payments and walk away from the property in the event of a financial event in their lives,” says Casey Fleming, a mortgage adviser with C2 Financial Corporation.“And land is much harder to sell [than a home].”Many lenders do not even offer lot loans, and community banks and local credit unions can be a better bet than large national banks. As with any loan, be sure to shop around so you can compare all of the offers available to you.”

If you are ready to purchase land and build right away or if you have land and want to build, the construction loan is best for you. If you own land, the equity on the land can be put up as collateral to help finance your construction loan.

When you are shopping for a construction loan, make sure to choose a very experienced construction loan broker. There are two types of construction loans a standard short-term and an all-in-one.

A short-term loan is used most when someone is financing to build a custom home. The short-term loan is used to build the home, and then a long-term loan (mortgage loan) is used to pay off the completed home. In order to be pre-approved, you will need to have a downpayment of at least 20% to 30%, a good credit score, a low debt-to-income ratio, and cash reserves.

There are plus and minuses to using this type of loan. The negatives are you have to have two closings and you might receive terms for your second mortgage that aren’t what you were planning on due to rising interest rates. On the other hand, you might get a better rate if the rates are lowered during the time period you are closing on your mortgage. A positive to this loan type is flexibility due to the ability to pick and choose instead of relying on a package loan deal.

The other option is an all-in-one loan. So instead of two separate loans, lenders offer packages with short-term construction loan terms and a mortgage loan set in advance.  The construction loan is converted to a long-term, permanent mortgage after the construction is completed, meaning there is just one loan and one closing. For preapproval on an all-in-one loan, you must obtain a qualified, licensed builder, detailed specifications about the custom home which includes projected costs, and a home value estimate from an appraiser based on the plans of the home you are going to build.

If you are planning to purchase land and build a home either now or in the future, contact a lender who specializes in these types of loans. They will not only be able to advise you on what type of loan is best, but also will get you the best rates possible with great terms.

“The construction-to-perm loan allows you to modify your construction loan to the permanent stage, which can be any term that you chose when the construction-to-perm lender offered it to you at the beginning of the construction stage. You normally do not have to requalify for the permanent loan,” says mortgage expert Joey Campbell.

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