Home Construction and Renovation: A Handy Guide from Muncy Bank

Everyone has his or her vision of a perfect home—the key is to bring it to life. In a buyer-friendly environment such as that offered by the greater Williamsport area and Lycoming County—the area served with pride by Muncy Bank—with home prices below the national median, many things are possible that are more difficult in dense urban areas. The cost of land is quite reasonable, making it possible to purchase a lot, select a house model that meets the needs of your family, and build it without excessive cost premiums above already-existing homes. There’s also an intriguing mix of old and new housing stock for those who would like to renovate a house, either because they think it will be more economical, or due to personal interest.  

So, if you have your ideal home in mind, there are several different ways to bring it to fruition—and Muncy Bank has financing options for all of them, from renovations, to land purchases and new construction, to the purchase of existing houses. Let’s cover the process that most newcomers probably know the least about first, purchasing land and building a new home.

Discuss your budget with your contractor.

 

Get your financing in order

Creating a home construction budget is a first step to building your new home.

Check your credit to ensure that there are no issues (unpaid bills and long-term debts). Generally speaking, if you have the savings for a down payment, but a lot of debt, paying down some or all of your debt is a good idea prior to starting the home building (or any home-buying) process. Generally speaking, a high debt-to-income ratio (say, more than 30%) will lead to lower credit scores and higher interest rates.

Identify some neighborhoods or general areas you’re interested in. Williamsport and its surrounding areas provide opportunities for building in town or in a rural environment. A quick screen of lots available at Realtor.com reveals both, with price ranges for land as low as $21,000 and as high as between $100,000 and $200,000. In this case, your choice will be driven both by personal lifestyle preferences and what you can afford.

Determine a comfortable price range: Generally speaking, a bank will want your total loan payments to be less than 43% of your gross salary (what is called a “back-end ratio”).  In other words, if your household income is $80,000, your total payment should be less than $2,866 a month including taxes and insurance (since $2,866 times 12 is $34,392). Of course, most people, after reviewing their overall financial situation, may wish to pay less than this for monthly housing costs.

Understand construction loans: These loans function as short-term loans for real estate that then either (a) must be replaced with a second loan (with its own reapplication process), or (b) are set up to convert automatically to a conventional mortgage. The short-term loan includes land purchase costs, the cost of building the new home, and (in some instances) covers the renovation of existing structures. During this time period, home buyers only draw down the money required to cover the construction and pay interest-only payments.

Muncy Bank can help you go through the approval process for the preferable “single close construction loan”—a loan for new construction that automatically converts to a traditional mortgage once the home is completed. This is easier than having to qualify for two separate loans—one for the construction/land purchase, and then another one for mortgage conversion.

A single close construction loan converts to a traditional mortgage.

A detailed description of the mortgage process at Muncy Bank is available for those who are buying pre-existing homes and are seeking financing.

If you know where you would like to build your house, but haven’t yet decided on exactly what house to build, Muncy Bank can also start you off with lot and land financing, which can help you move forward in building the home of your dreams.

 

Selecting a home building site and a model

Communities such as Muncy, Montgomery, Montoursville, Avis, Linden, Dewart, and Hughesville offer excellent public schools, a friendly atmosphere, and offer reasonable home prices.

 

Selecting an already existing community vs buying land

Selecting an already-existing community to build a home in has the advantage of familiarity, and of eliminating some types of uncertainty.

  • You can already see what the community is like by just walking around and talking to others who live there.
  • Secondly, it’s easier to envision what some of the models of houses will look like upon completion. Potential other considerations include the cost of belonging to the homeowners’ association, and their associated bylaws—some people find these bylaws challenging and the costs prohibitive, especially since many people did not grow up with these associations. Others enjoy the services, the community identity, and other amenities.

Never fear, however—with an area that is (compared to the coastal corridors) relatively underdeveloped, you can also open up your possibilities and purchase a lot on your own.  

 

Builders in Lycoming, Clinton and Northumberland Counties

Many different sites have compiled comprehensive listings of home builders in the area served by Muncy Bank, including the Builders Association of Central PA.

One important thing to remember when selecting a builder is that your ability to communicate with them is vital. There may be things that are difficult to talk about such as cost overruns, assertions that something you’re looking for in a house won’t be executed either on budget or at all, and other differing points of view. It’s more than money or the house sometimes—your builder is your business partner, and you want one whose communication style meshes with yours.  

Find the right contractor to keep your project under control and within budget.

As a bank that has been serving our community since 1893, Muncy Bank has an extensive long-term history working with individuals who have used a wide variety of builders. Our loan officers have an excellent knowledge of the area. Contact us to learn more.

 

Get the work done

Your builder will be undertaking a very specific set of steps in building your home.  During this process, two things are vital: understanding what a realistic timeline is for completion of your new home (since you’ll have to live somewhere while you are waiting for it to be complete) and continuing to nurture your relationship with your builder.

  1. The first two steps create the basic structure (prep/pour; rough framing); these are followed by putting in the plumbing, electric, and HVAC, along with insulation.
  2. From there, drywall is put up and the interior finishes and exterior are completed.
  3. The flooring comes last.

When everything is done, you should do a walkthrough and communicate any concerns to your builder.

 

New Construction vs. Renovation

If you’re someone who feels anxiety while waiting for something to be completed from scratch or would like to take on a house that has just about everything you want but is a bit of a project, you’re in luck. As we noted earlier, Muncy Bank doesn’t just give home loans for new construction—our mortgage lenders can discuss with you a comprehensive set of mortgage offerings, including those with low down payment options.  We also offer home renovation loans, so you can turn your current house into the space of your dreams or buy a fixer upper to make your own.

Renovating your home increases your enjoyment of the space and the value of your home.

When taking on a home renovation project, the following are important to consider:

What can you do on your own?

Contractors generally will charge 2 times to 4 times the amount it would take you to complete a simple project on your own. Can you re-tile a floor? Fix basic roof issues? Paint like an expert? Repoint bricks (and thus avoid having a mason come and do the work)? Sand down and refinish a hardwood floor? Or, perhaps more relevant—are you willing to learn? There’s a large financial incentive to learning.

What’s the cost of what you can’t do?

There are several types of repairs that can easily cost more than $5,000 to $10,000 without necessarily adding to the value of the house. For instance, people buying a house basically expect that their plumbing will work, and that their roof won’t leak. Foundation work, while being expensive, also has no resale added value unless it has been discounted for accurately and fairly prior to purchase. Accordingly, take these types of issues into account and offer a price for the house that is fair for you.

Is the home livable while you are undertaking renovations?

If you’re gutting your primary living area or your main bathroom, you may not be able to live in the house during the time the work is taking place. You’ll want to consider whether all of the work associated with the house needs to be accomplished right away.

For the projects you cannot do on your own, talk to friends and family to find out if they have experience with a local contractor.  You will want to contact several professionals for each job, so that you engage them in a competitive pricing process, find out if they are experienced and licensed to perform the work you need done and also so you find someone you like working with.    

 

Local Home Loans from your Friendly Community Bank

Our mission at Muncy Bank is to serve the banking needs of Muncy and the surrounding area. Home purchases are one of the most important financial decisions a family can make. We are excited to help you with your home buying journey, whether you’re seeking land to build on, a fixer-upper, or a recently built home.  Contact us or visit your nearest Muncy Bank location in Dewart, Avis, Linden, Montoursville, Clarkstown, Hughesville, and Muncy.

Start a conversation about home construction or renovation with a lender today.
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