One note on a basement, kinda a side track. We are big into modern architecture, and were touring a home last year where the basement felt different.. We could not figure out what it was, but it was light and airy but really no windows to speak of. Asked the owner, he asked us to look up and showed us the 10ft walls. It was really a game changer in our book, I know it is hard to believe but it really changed how we perceived having a basement would effect us. Now it is on the probability list.
In our house, that I designed, the basement floor is 14' lower than the upper (living) floor. We have a drop ceiling at 10' height in the downstairs, and overhead lights like in an office building. The floor joists are 12", so we have 3' above the ceiling, which works out very well for running HVAC, wiring, plumbing, etc. Whenever I need a new wire, just move the drop ceiling panels and put it in.
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Recommendation:
Even if you don't want a mortgage on the final house, jump through the hoops to get a construction loan which turns into a mortgage when you are finished. You pay some fees up front, but you pay no interest on the construction loan until you actually draw money against it. This is the cheapest insurance you are ever going to get.
Think about what will happen if you get the house 3/4 built and discover that it really was more expensive than you thought it was going to be. You will be financially depleted and it is very hard to get a loan on a partially built house, whereas it is easier to get a loan on plans even if you are acting as an owner-builder. If you have to sell a 3/4 built house, you are going to take a financial beating like you will not believe. No one will want to buy this from an owner-builder, and you will be lucky to get 1/3 of its cost back after years of trying to sell.
If for some reason you can not convince a bank that you are a good risk as an owner-builder, think long and hard about the whole project. I know they are very conservative, but it may just be that the idea is unrealistic. I suspect that if you have strong enough finances, you will be able to get a loan like I describe. If you end up with a small mortgage on your dream house, that may be disappointing, but it is a lot better than having to sell a partially built house.
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Second recommendation:
Definitely build and finish the shop/small living quarters first. Working alone will be much slower than a contractor with a crew, and a dry, secure place to store materials, tools, equipment, etc. on the site will be very valuable. Plus you will get a better idea of costs and time involved. Estimate the cost of this building before hand in exactly the same way you estimate the main house. Then keep careful track of the costs, and you will be able to make a much better estimate at completion than when everything is just ideas own paper.
I know this paperwork sounds a lot less exciting than the physical labor of building the main house, but it is more important by far if you are working on a tight budget.
The year I built it the taxes were less than $100. Not sure if they have gone up yet.
