I've built a couple houses that way. It will save you money but it will also take a lot longer than you expect. The ones I did all took about 5 years to completely finish.
As far as the occupancy permit is concerned I doubt any building inspector would throw you out of your house as long as you had a functioning septic, running water, bathroom and were only using it on weekends. I've seen some camps around the lakes that are a lot worse and have been used that way for ever.
Many towns will allow a trailer for a year while building but I've seen people stretch that longer than a year.
The first home I built that way was 30 years ago. I tried to get an occupancy permit with one functioning bathroom and they wouldn't give it to me.
I told the building inspector I was moving in anyway because I had no where else to go.
I did the kitchen my first week in the house and it took me 5 years to complete that house. I never got an occupancy permit.
I borrowed money from my in laws to finish the house then got a mortgage after that 3br, 2 1/2 bath house was completed to pay them back all without an occupancy permit. My kids crawled around on plywood floors for a few years, heaven forbid!
I sold the house after about 12 years and that guy just sold it recently and no one has ever discovered that it never had an occupancy permit. Oh, and by the way, it just sold for 750K.
