Questions for those who have built a new home while before selling your existing home

My girlfriend and I have been wanting to buy some property and build a house for a while now. I know the building process can take 6-12 months, depending on a number of things, and we'd rather not sell our house first and move into an apartment while our new home is being built, but if we have to, we have to.

What I'm wondering is, for those of you who have built a house while you were still in your existing home, how did that work in regards to getting approval for the construction loan and whatnot? Did the bank write the mortgage in a way that it is understood that as soon as you're in the new home, your existing home would go on the market and be sold and therefore not count against your debt-to-income ratio? Also, for the larger banks, which ones have been offerings for mortgages that allow you to buy property and build your home on it?

We have our current house in NC, as well as our original house in OH (that is too upside down for us to be able to sell any time soon), so that is why the debt-to-income ratio is a potential concern for us. Both are through Wells Fargo, who told us they don't do construction loans.

Appreciate any insight anyone can contribute to the whole process.

Hi. I’m in the process of finishing a House right now with my wife. Here’s the advice I can give. Get everything triple quoted. Make a budget and add 50%. Do not use anybody that does not come highly recommended from people that have used them.
Contractors can be the scum of the earth. We were ripped off by every trade except for two during this build. It’s unimaginable that these people survive but they do.
If you can buy a turnkey solution do that. Best of luck!

You need to talk to some mortgage lenders. It will be entirely up to them. If you already have two mortgages I would think the debt to income ratio is going to be hard to make this work.

We did it the last go around. But the builder bought the lot (1.5 acres) built the house and shop and then sold it to us.

The mortgage company wanted an active listing to take it off our debt to income ratio

Good luck on with the construction loan. I have heard it can be a pain in the ass to go that route, but in some cases its the only way to go.

Are you doing a joint mortgage?

TERMN8U said:

Here’s the advice I can give. Get everything triple quoted. Make a budget and add 50%. ... Contractors can be the scum of the earth. We were ripped off by every trade except for two during this build. It’s unimaginable that these people survive but they do.
If you can buy a turnkey solution do that. Best of luck!

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Ugh! Reading things like this make me want to avoid doing this, but we have some things we need/want that would make it very hard to find an existing house that would be suitable.

sleek98 said:

We did it the last go around. But the builder bought the lot (1.5 acres) built the house and shop and then sold it to us. ... The mortgage company wanted an active listing to take it off our debt to income ratio

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Interesting. So they just wanted your house listed on the MLS and that was sufficient for them to take your existing mortgage out of the D:I? That's not too bad. Could probably just list it rather high so as to make it unlikely to sell for a while, no?

BlckBox04 said:

Are you doing a joint mortgage?

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Yes, we'd both be on the new mortgage, just like we are both on our other two existing mortgages as well.

Usually there is a contigency that you sell your current home before the new one goes into affect. I just did a new build, not a custom build though. I was pre-approved under the condition that I sold the house that I was living in at the time.

98 Saleen Cobra said:

Usually there is a contigency that you sell your current home before the new one goes into affect. I just did a new build, not a custom build though. I was pre-approved under the condition that I sold the house that I was living in at the time.

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So you're saying the mortgage for the newly-built house didn't "go live" and have any payments required until the other house got sold? If so that's pretty good.

CobraJohn01 said:

So you're saying the mortgage for the newly-built house didn't "go live" and have any payments required until the other house got sold? If so that's pretty good.

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No it wouldn't go live until you close on the house, which is contigent on you selling your other one.. NOW lets say your other house doesn't end up selling.. Someone still owns that house and can sell it..

TERMN8U said:

Hi. I’m in the process of finishing a House right now with my wife. Here’s the advice I can give. Get everything triple quoted. Make a budget and add 50%. Do not use anybody that does not come highly recommended from people that have used them.
Contractors can be the scum of the earth. We were ripped off by every trade except for two during this build. It’s unimaginable that these people survive but they do.
If you can buy a turnkey solution do that. Best of luck!

Click to expand...

TERMN8U said:

Hi. I’m in the process of finishing a House right now with my wife. Here’s the advice I can give. Get everything triple quoted. Make a budget and add 50%. Do not use anybody that does not come highly recommended from people that have used them.
Contractors can be the scum of the earth. We were ripped off by every trade except for two during this build. It’s unimaginable that these people survive but they do.
If you can buy a turnkey solution do that. Best of luck!

Click to expand...

This is not a fair assessment. First off, I have walked through very few turn key homes and thought the materials used and the fit and finish even ranked as mediocre. Second, most clients want custom mcmansions built for the same price as box homes and row housing. This really handicaps a contractor from being able to provide a quality finish.

I have worked for two different contractors. The first contractors attitude was we are going to do a quality job no matter how long it takes or how much it cost. The second was always trying to hire cheap labor to get the job. Even though the first contractor was more expensive, no one ever said of him that they wished they had hired another contractor. He even stayed busy during the housing recession. I never stressed when I was working for him. The second contractor is no longer working due to constant problems and the stress that comes from clients not happy with the problems. We always finished projects 3-4 months over schedule. Clients routinely withheld money from him, and even after he had fixed the problems, the clients felt justified in not paying him. Every day working for him was stressful, but I was stuck because first contractor wasn't commercial and I wanted my commercial license so I had to do two years under a commercial contractor. That was a long two years working for the second contractor.

Now that I am a GC I do things a little different than both of them. My goals are to get a project done on time (that is the only way to be profitable), and to have excellent quality when it is finished. I do not use clients subcontractors because I cannot control the scheduling for a sub I'll use once. I don't bid out my projects to multiple subs in each field because I want my subs and me to have a mutual understanding that we are looking out for each other. If I get a price back and it seems high, I will ask them to explain it. Sometimes I didn't do a good job explaining the scope of work and they lower their prices. I charge 20% of the overall project for my fee. I show the clients all the quotes and allowances and they see exactly what I'm getting paid. I write the schedule so that if no change orders are made I usually finish a little early. Even with change orders, I usually finish withing a couple weeks of the original projection.

I have yet to have a client complain that they didn't get exactly what they were paying for, nor have I had to fight about money with a client. My profit margins are good because I don't have projects dragging out.

tistan said:

This is not a fair assessment. First off, I have walked through very few turn key homes and thought the materials used and the fit and finish even ranked as mediocre. Second, most clients want custom mcmansions built for the same price as box homes and row housing. This really handicaps a contractor from being able to provide a quality finish.

I have worked for two different contractors. The first contractors attitude was we are going to do a quality job no matter how long it takes or how much it cost. The second was always trying to hire cheap labor to get the job. Even though the first contractor was more expensive, no one ever said of him that they wished they had hired another contractor. He even stayed busy during the housing recession. I never stressed when I was working for him. The second contractor is no longer working due to constant problems and the stress that comes from clients not happy with the problems. We always finished projects 3-4 months over schedule. Clients routinely withheld money from him, and even after he had fixed the problems, the clients felt justified in not paying him. Every day working for him was stressful, but I was stuck because first contractor wasn't commercial and I wanted my commercial license so I had to do two years under a commercial contractor. That was a long two years working for the second contractor.

Now that I am a GC I do things a little different than both of them. My goals are to get a project done on time (that is the only way to be profitable), and to have excellent quality when it is finished. I do not use clients subcontractors because I cannot control the scheduling for a sub I'll use once. I don't bid out my projects to multiple subs in each field because I want my subs and me to have a mutual understanding that we are looking out for each other. If I get a price back and it seems high, I will ask them to explain it. Sometimes I didn't do a good job explaining the scope of work and they lower their prices. I charge 20% of the overall project for my fee. I show the clients all the quotes and allowances and they see exactly what I'm getting paid. I write the schedule so that if no change orders are made I usually finish a little early. Even with change orders, I usually finish withing a couple weeks of the original projection.

I have yet to have a client complain that they didn't get exactly what they were paying for, nor have I had to fight about money with a client. My profit margins are good because I don't have projects dragging out.

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You’re a GC I would love to work for.


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I tried selling and timing it, and it turned into a ****ing disaster. You are better off selling, staying in an apartment for 8-12 months, and then moving into the new house. Trust me, it is FAR better this way.

nxhappy said:

I tried selling and timing it, and it turned into a ****ing disaster. You are better off selling, staying in an apartment for 8-12 months, and then moving into the new house. Trust me, it is FAR better this way.

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Good advice here

nxhappy said:

I tried selling and timing it, and it turned into a ****ing disaster. You are better off selling, staying in an apartment for 8-12 months, and then moving into the new house. Trust me, it is FAR better this way.

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Only thing I would add is make sure you have a month to month option. We ended up selling our house in February. We hit delay after delay and our 3 month apt stay turned into a 6 month stay but the apartment rented our place for the last month so we had to go stay with my dad for a month. Moving 3 times in 6 months sucked with a newborn.

month to month is a great idea. You don't want to be locked into an apartment contract.

You are dreaming


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TERMN8U said:

Hi. I’m in the process of finishing a House right now with my wife. Here’s the advice I can give. Get everything triple quoted. Make a budget and add 50%. Do not use anybody that does not come highly recommended from people that have used them.
Contractors can be the scum of the earth. We were ripped off by every trade except for two during this build. It’s unimaginable that these people survive but they do.
If you can buy a turnkey solution do that. Best of luck!

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Can you go back and post your second paragraph in super bold and larger font. This is so so the truth.

I could go on for pages on the original question but every state is different and some counties and states are different. Don't get the cheapest contractor, if you can do any of the work yourself than do it. GET EVERYTHING IN WRITING! and call different local banks. We have a local bank that always has the best construction loans and then they sell it off within the first month. Mine was sold to BB&T after I closed out my Construction loan.

We just finished a custom build late February this year. We paid cash for a 1/2 acre lot (our down payment). We did not want to deal with the headaches of a construction loan( dealing with contractors, bad quotes, poor quality, ect). I told the builder what we wanted and if it was not correct, he fixed it at no additional cost to me. So we deeded the land over to the builder. He took 5 months to complete our house mainly because we only finished the upstairs and I'm finishing the basement. We had to qualify for the loan before the builder broke ground. This was based off our debt-to-income ratio for carrying both mortgages. We were fortunate our house sold within 48 hours of being listed and we closed on out

As for the budget, we selected a builder with high allowances and we were only 5% over the original estimate. Most of that was because I rolled the wrought iron fence into the loan.

I would talk with a couple of realtors and see how fast homes are selling for your current home. We listed our last home for 189K and it sold for 191K. Homes under 200K range were selling very fast in my area.

We had a very good building experience and the superintendent still helps me when I have questions on the basement. I even order my cabinets for the basement through him and he even helped me install them.

GodStang said:

Can you go back and post your second paragraph in super bold and larger font. This is so so the truth.

I could go on for pages on the original question but every state is different and some counties and states are different. Don't get the cheapest contractor, if you can do any of the work yourself than do it. GET EVERYTHING IN WRITING! and call different local banks. We have a local bank that always has the best construction loans and then they sell it off within the first month. Mine was sold to BB&T after I closed out my Construction loan.

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If I bid a project and an owner says he’s going to help and in turn I’m am expected to reduce my price I am out. Red flags all over that scenario.


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coposrv said:

If I bid a project and an owner says he’s going to help and in turn I’m am expected to reduce my price I am out. Red flags all over that scenario.


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Not only is it a price issue, it is also a quality issue. The finished product is my reputation, and I'm not going to put that on the line so a home owner can save a few bucks. Only exception to this is when my subcontractors are working on their own homes. I let them do just about any of the work and sign off on it.