Hello. My wife and I are interested in building are own home, rather
than buying a resale. Resale homes where we want to live are now up to
$200/sq ft. We've been told you can build your own home for $85-$100/sq
ft.

In any case my brother is an architect by trade and he is willing to
design the house for us.

I want to know if anyone can recommend a good construction loan
company, or tell us which ones to avoid. As far as I understand,
construction loans are lines of credit and you are charged interest as
you use the funds from the kitty available. Then when the home is build
you can transform the 'construction' loan into a traditional loan
pledging the house as collateral.

One thing I don't understand is... do you need to own the land free and
clear or can you get a land loan also?

Also can anyone tell me what fair closing costs are on construction
loans?

I'm doing the same thing as you are right now. We bought the land and
will own it when the building begins. Some builders have the ground,
and will build your house on their land. One builder had many lots
which we could choose from...but we choose to buy a 4 acre lot in the
country.

For our construction loan, we went with a local bank...will have a 1
year ARM and will only pay interest on the principal, I believe it's
4.5 or 4.6 %. Some banks limit the number of drafts you can have on
the construction loan. Our bank has unlimited drafts, and a
construction manager that will verify the drafts and purchases along
the way. He will also assist with making sure we get lein waivers from
the subs, I'll be my own GC.

We will have one closing cost for the construction loan and mortgage,
something new for this bank...looks like a pretty good deal.

Building cost...with out knowing your location, we can't ballpark your
construction cost..in central Iowa, for a plain house your looking at
110-115, for a custom home 135-140.

Good luck...

Darwin