If you have a house plan you like break it down into all the different segments. Learn as much as possible about each segment identifying all the parts and the labor. YouTube is a good resource. I did the electrical except for the main connection, window/door install, all painting, light fixtures, kitchen, etc. You can start a company and get a sales tax license in your state for discounts. Get multiple prices on everything. Check with the Building Department for what you have to submit for plans and what permits will cost. You can do a lot as the owner builder. The more you put into the build the less you'll pay.

If you work for a company try talking to them about financing. Some offer help.

Your best bet still seems to be to go through the loan process. Yes, it may be very tedious. But your stress level will be lower. It seems like with the cash on hand and equity in your land, that you should be fine for the 75-80%LTV. If they decline the loan, then look at making it more complicated. Keep in mind that your 401K and Discover loans shouldn't be for the whole build timeframe. You would want to secure the land equity loan (if possible, which I doubt) first. If you are living somewhere paying rent, move into a camper on your land to put that money towards the build. If your area allows, you may also be able to drag the build out a few years as you pay cash. Then you could finish up with the Discover and/or 401K loan.

Your math and thinking is wrong. Way way wrong. The basement might be not be finished, but it still has to be built, and plumbing roughed out, and electrical run. You have lot development costs, and a whole host of things not on your radar. Plus, you cannot get an equity loan on land in which you are building. The build and the land are joined, and the value of he land is changed as a result.

Double your seat of the pants estimate at least. And keep saving. You are not ready to build by a long shot. No one who would charge on a credit card or borrow from retirement is actually ready to build anything.

When you are ready, with a more fiscally responsible plan and more savings, you need a conventional mortgage for your own protection.

No. Especially NO on robbing 401k. Triple no on Discover. Your cart is far, far, ahead of any horse. Buy an 80 k house in Kentucky with a conventional mortgage. Fix it up , sell it, and work your way to building. Later. Way later.

NO to using your Discover card to finance a house. Just no, no, no. If at age 24 you have managed to save $60K in cash and have a 80K in a 401K, keep saving and wait a couple of years. It shouldn't take you too long. I believe you will be taxed/penalized for withdrawing that 40K from your 401K.

As far as the idea of getting a discount from contractors because you can "write them a check." Everyone writes contractors a check whether they have a construction loan or cash. Don't count on a discount.

One final piece of advice: absolutely do not use every dollar of your savings to build the house. You need a cushion for the inevitable extra charges that pop-up in building.

You are clearly not a financial advisor. Get one. He/she will be impressed with your savings discipline to now, and will give you the best advice to suit your long term goal of building, and potential "life emergencies" such as the loss of a job, a ,medical event, the need for a new vehicle and the very REAL NEED to save for old age. There is no " too early" to worry about that issue, nor the rest. There is no such thing as too early. And nobody ever went broke by NOT having debt.

I agree with the idea to buy an existing house and fix it up. You'll "practice" and hone your homebuilding and finishing skills and improve an existing property - then sell for a profit, then repeat. After a few turns of the crank, you can decide what you are good at, and what you might want to hire out in your build.

DO NOT take crazy Discover loans. I am not in full agreement with the 401k loans - they have their place. Unfortunately - not in today's market where your 401k is going to grow far faster than the interest you "pay yourself" so it's a major hit. When the stock market is in bear mode - then it's better. As long as you continue paying yourself back, I've done it - it's made sense for me in the past.

Wade into this - build your skills and your equity, and then spend time making some relationships with contractors too. Great investment in your future.

The "tedious process" is probably construction draw financing. The bank gets a third party to evaluate what percentage of the work is done, and they release funds to the builder based on percentage completion. It may seem tedious but it's the only way to ensure that you don't end up with a fully paid builder and a partly completed home. Beware.

Like bry, my field is also Finance. Interesting that only the 2 of us seem to see this as AN option. While a construction loan is generally an ideal solution, there are also costs associated with that. OP is 24 and has more in savings than most 30 year olds. The max loan term from a 401K is generally 5 years. The rates I’ve seen for these loans are around 6%. I believe the stock market does better, but OP has already set himself up for a good retirement, even if he never contributes anything else to the 401K and takes the loan and repays it. There are no tax penalties unless the loan is not repaid. Assuming OP takes 12-24 months to build the house, he is not looking much money by paying himself 6% versus earning 10%. Also, the 401K loan balance will be significantly lower when OPs house is done as he is making P/I payments on that loan with a 5 year amortization....versus interest only on the construction loan. I also don’t love huge credit card loans, but OP did not give the rate he expects on a Fiscover loan. He very well could be saving interest payments on this portion of the funding.

While OP would have higher monthly payments during the build, OPs plan insists that his balance owed at construction is less than borrowed due to the nature of the payments. Even the new land loan is likely to require principal payments (since not associated with a construction loan). Therefore, OPs final mortgage payment will likely be less than if he paid interest only on a construction loan. This allows OP to then have more disposable monthly income that can be diverted to other savings.

Many jurisdictions allow you to drag out a build. It is important for OP to determine if he can do this if he underbidgeted. However, based on OPs savings (particularly 401K, which requires earned income), it is logical to assume that OP can cover much of the cost overruns during the normal course of his build.

Actually, I said 401k loans are reasonable in certain circumstances. And have taken advantage of them myself.

So refreshing for true experts to chime in.

Thank you for the advice everyone, I will definitely take it into consideration. But there seems to be a lot of misconceptions by many of the posters here. One of them being that since I am young, this is a spur of the moment decision and I haven't thought about anything. Maybe that is my fault for lack of details. I bought my land when I was 21 years old. It has county water, septic sized for a 3 bedroom house, and electric. I "practiced" my skills on a mobile home on the property and sold it earlier this year for a nice profit. I have also been the right hand man to my dad while remodeling his house. I have no interest in buying houses to flip, or living anywhere else other than on my property. Buying houses to fix up and sell later is just as risky as anything else, there is a lot that can go wrong. I have spent the last 2 years designing this house myself and planning, researching, reading, and learning about every aspect. Financing is probably one thing I could have spent more time thinking about.

Secondly, many of the same posters have not clearly read what I wrote. Some of you seem unaware that Discover is more than a credit card company. I have a savings account with them earning 1.5% interest. They do personal loans, and banking as well as credit cards. I am not saying I will charge my credit card. As I said in the original post, I would get a personal loan. At 6.99% for 84 months. Borrowing from my 401k is an option most people naturally reject. But according to T Rowe Price, if I borrow 40k and continue my existing contributions, my balance at retirement age will only be 11k less than if I had not taken the loan. At 5.75% interest for 60 months I really don't see this as a bad option. Keep in mind that after the house is built, a home equity loan will be taken to pay the other loans off.

Thirdly, it needs to be realized that all this will not be done at once, but in stages as needed. Also I am working and earning a paycheck at the same time, which means I have income coming in every two weeks. My 401k contributions are staying the same. My only debt is my land right now. B Carey pretty much hit the nail on the head in his post. I have 2 good friends that have built their houses as their own GC in the past 5 years. And my uncle built his as his own GC about 10 years ago. I have resources. And to the lady who says double my "seat of the pants" estimate, there is absolutely no way this house would cost $240 a square foot.

Do you have a contingency plan should you lose your job or unfortunately suffer an illness or injury which prevents you from earning an income? It is great that at your age you are trying to build your own home but realistically borrowing money is the easy bit, repaying it is the hard bit. Make sure you have a foolproof plan in place for all possibilities to ensure you don't end up losing everything you have worked hard for trying to achieve this. Lending institutions can appear to be your best friend until something goes wrong.

The problem with your plan is financial flexibility. I was on board your financing solution until you got to, "I think I could come up with the other 20k working overtime for the next year or two." That means this project is undercapitalized and I would advise you keep working it.

You need access to full financing for at least 120% of the cost of the project (without working more). That doesn't mean that you have to spend that much but you want some path way to it being available other than build slower (such as a 401k loan). Really at minimum you need to come up with another $35,000 of financing.

I have done several projects in Kentucky, in fact, I am typing this from Kentucky right now as I relax on the farm for a few weeks. I can tell you that building a simple home cheaply is doable in Kentucky, but the idea of having a house built cheaply while you are working overtime is dangerous. I have never found it easy to work extra when I am building anything, even when using a G.C. and, in fact, find it inconvenient not to take additional time off.

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Finally, there are several missing pieces of information here and I have concerns about that. Garbage in = garbage out. My advice is exactly as good as the information I am basing it on.

For example, Discover loans are from 6.99% for people whose credit score is above 800. For 740 to 799 that percentage is 10.99%, and for 670-739 (the average U.S. score) the rate is 13.99%.

I generally like to give people the advice they ask for rather than make assumptions to their situation, as everyone's situation is different. However, I do admit that were we face to face right now, I would need a lot more information from you. I simply can't imagine anyone with an 800 credit score and $134,000 cash and equity struggling to get a $120,000 construction loan. Again, not saying that isn't the situation, but I suspect there is a better solution out there.

following

jannicone-I was not referring to your comment saying no to a 401K loan, but several other comments. There are times when it can make sense. If repaid, there are no tax implications, which is not inline with other comments made on this thread.

bry-I also missed the extra 20K working overtime comment. Maybe OP edited the post after our original comments. However, maybe OP also meant EXTRA as in above his current income that has allowed him to stash away savings. I am still under the assumption that OP makes a good base income, and can live on rice/beans and in his car during the build, thereby keeping more of his income disposable. If OP isn't married, no kids and is only 24, he should be able to spend nearly 16 hours a day at his paid job or housesite. (maybe not quite, but surely more than the majority of the posters who are much older with less stamina).

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As I said in the original post, I would get a personal loan. At 6.99% for 84 months. Borrowing from my 401k is an option most people naturally reject. But according to T Rowe Price, if I borrow 40k and continue my existing contributions, my balance at retirement age will only be 11k less than if I had not taken the loan. At 5.75% interest for 60 months I really don't see this as a bad option. Keep in mind that after the house is built, a home equity loan will be taken to pay the other loans off.

OP-Good for you for running the calculator. Please also calculate how much you would have paid down with the payments you gave over the period of construction. I am also assuming that you will take the 401K and personal loans later in the construction process, so the actual timeframe will be less. Consider from a financial perspective if you just paid the personal loan and 401K loan over the 5 year period instead of taking out a loan after the build. While your monthly payments would be higher, you likely could have your home paid for in 5 years.

YOu do not have to post “following” on every dilemma that you want to follow. Just “like” the original post in the Dilemma and you will have followups in your feed.