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I am 19 and I plan on working on a cruise ship to save up around $20,000 to buy a plot of land in Oregon and build a tiny house for myself; however all of this is just an idea at the moment, nothing has been put to paper.
How could I best draw up a plan and accomplish it task by task?
Will I need to build credit?
This is the next phase of my life and I don't want to invest my time and money into a particular part of the plan that either isn't important or I wont end up figuring out.
If there is land for sale, you can buy it. The United States doesn't have many restrictions on the purchase of land.
However, you need to be able to afford it. Dependent on where you are looking $20,000 can either be a lot or very little land, I suspect that the question you were looking to ask is 'can I afford it?'.
Have a look around, there should be plenty of places for you to find land for sale.
As for credit, it is more important that you don't build bad credit. With things like mortgages, your salary is likely to be more important than your credit score alone, but no one will give you a dime if you have a record of not paying your bills.
Here are some important things to think about. Alan and Denise Fields discuss them in more detail in Your New House.
Permanent work. Where do you want to live? Are there suitable jobs nearby? How much do they pay?
Emergency fund. Banks care that you have "reserves" (and/or an unsecured line of credit) in case you have a run of bad luck. This also helps with float the large expenses when closing a loan.
Personal line of credit.
Who are you building for? If you are not married, then you should consider whether building a home makes that easier, or harder. If you hope to have kids, you should consider whether your home will make it easier to have kids, or harder. If you are married (or seriously considering it), make sure that your spouse helps with the shopping, and is in agreement on the priorities and choices. If you are not married, then what will you do if/when you get married? Will you sell? expand? build another house on the same lot? rent the home out?
Total budget. How much can the lot, utilities, permits, taxes, financing charges, building costs, and contingency allowance come to? Talk with a banker about how much you can afford. Talk with a build-on-your-lot builder about how much house you can get for that budget. Consider a new mobile or manufactured home. But if you do choose one, ask your banker how that affects what you can borrow, and how it affects your rates and terms. Talk with a good real estate agent about how much the resale value might be.
Finished lot budget. How much can you budget for the lot, utilities, permits required to get zoning approval, fees, interest, and taxes before you start construction?
Down payment. It sounds like you have a plan for this.
Loan underwriting. Talk with a good bank loan officer about what their expectations are. Ask about the "front-end" and "back-end" Debt-To-Income ratios. In Oregon, I recommend Washington Federal for lot loans and construction loans. They keep all of their loans, and service the loans themselves. They use appraisers who are specially trained in evaluating new home construction. Their appraisers tend to appraise a bit low, but not ridiculously low like the incompetent appraisers used by some other banks in the area. (I know two banks with lots of Oregon branches that use an appraiser who ignores 40% of the finished, heated area of some to-be-built homes.) Avoid any institution (including USAA and NavyFed) that outsources their lending to PHH.
Lot loan. In Oregon, Washington Federal offers lot loans with 30% down payments, 20-year amortization, and one point, on approved credit. The interest rate can be a fixed rate, but is typically a few percentage points per year higher than for a mortgage secured by a permanent house. If you have the financial wherewithal to start building within two years, Washington Federal also offers short-term lot loans. Ask about the costs of appraisals, points, and recording fees.
Rent. How much will it cost to rent a place to live, between when you move back to Oregon, and when your new home is ready to move into?
Commute. How much time will it take to get from your new home to work? How much will it cost? (E.g., car ownership, depreciation, maintenance, insurance, taxes, fuel? If public transportation is an option, how much will it cost?)
Lot availability. How many are there to choose from? Can you talk a farmer into selling off a chunk of land? Can you homestead government land? How much does a lot cost? Is it worth getting a double lot (or an extra large lot)?
Utilities. Do you want to live off the grid? Are you willing to make the choices needed to do that? (E.g., well, generator, septic system, satellite TV and telephony, fuel storage) If not, how much will it cost to connect to such systems? (For practical purposes, subtract twice the value of these installation costs from the cost of a finished lot, when comparing lot deals.)
Easements. These provide access to your property, access for others through your property, and affect your rights. Utility companies often ask for far more rights than they need. Until you sign on the dotted line, you can negotiate them down to just what they need. Talk to a good real estate attorney.
Zoning. How much will you be allowed to build? (In terms of home square footage, garage square footage, roof area, and impermeable surfaces.) How can the home be used? (As a business, as a farm, how many unrelated people can live there, etc.) What setbacks are required? How tall can the building(s) be? Are there setbacks from streams, swamps, ponds, wetlands, or steep slopes?
Choosing a builder. For construction loans, banks want builders who will build what is agreed upon, in a timely fashion. If you want to build your own house, talk to your loan officer about what the bank expects in a builder.
Plansets and permits.
The construction loan process. If you hire a general contractor, and if you have difficulties with the contractor, you might be forced to refuse to accept some work as being complete. A good bank will back you up. Ask about points, appraisal charges, and inspection fees.
Insurance during construction. Some companies have good plans -- if the construction takes 12 months or less. Some (but not all) auto insurance companies also offer good homeowners' insurance for homes under construction. Choose your auto insurance company accordingly.
Property taxes. Don't forget to include them in your post-construction budget.
Homeowners' insurance. Avoid properties that need flood insurance. Apply a sanity check to flood maps -- some of them are unrealistic. Strongly consider earthquake insurance. Don't forget to include these costs in your post-construction budget.
Energy costs. Some jurisdictions require you to calculate how large a heating system you need. Do not trust their design temperatures -- they may not allow for enough heating during a cold snap, especially if you have a heat pump. (Some heat pumps work at -10°F -- but most lose their effectiveness between 10°F and 25°F.) You can use these calculations, in combination with the number of "heating degree days" and "cooling degree days" at your site, to accurately estimate your energy bills. If you choose a mobile or manufactured home, calculate how much extra its energy bills will be.
Home design. Here are some good sources of ideas:
A Pattern Language, by Christopher Alexander. Alexander emphasizes building homes and neighborhoods that can grow, and that have niches within niches within niches.
The Not-So-Big House, by Sarah Susanka. This book applies many Alexander's design patterns to medium and large new houses.
Before the Architect. The late Ralph Pressel emphasized the importance of plywood sheathing, flashing, pocket doors, wide hallways, wide stairways, attic trusses, and open-truss or I-joist floor systems. Lots of outlets and incandescent lighting are good too. (It is possible to have too much detail in a house plan, and too much room in a house. For examples, see any of his plans.)
Tim Garrison, "the builder's engineer". Since Oregon is in earthquake country -- and the building codes do not fully reflect that risk -- emphasize that you want a building that would meet San Jose, California's earthquake code.
