Take the first steps in the home-building process. The more you prepare, the more fun you have and the easier it will be for your builder. Turn your dream into reality.
Home Building Process – The First 4 Steps
1. Develop a Budget
A big part of the home-building process is forming a budget. Understand your finances so that you build a home that you can keep. Include the costs for the:
- Estimated Mortgage
- Home maintenance
Builders need the budget. It helps them set realistic expectations. They look at your plans, estimate the cost to build your house, and see if they can make your budget work.
2. Get a Piece of Property
You can’t build a house unless you’ve got the property. It can be on unplatted land. It can be a lot in an existing neighborhood. Doing this before you approach a builder helps move the home-building process along. Having the land in place gives the builder more of an idea of the scope of the project.
3. Get a Set of House Plans
The home builder will need a set of house plans. Some custom home builders have designers who help plan home designs. Other builders need you to provide house plans. It’s best that you know what you want. Know what architectural style you want. Decide on a floor plan. Have an idea of amenities and finishing touches.
Why is it an important first step? You get a plan that fits your budget. Builders use the plans to set the price for materials, labor costs, and other expenses.
4. Get Funding or Financing in Place
Money transforms your home from an idea to a reality. Have an idea of how you are going to pay for it.
a. What to do if Paying Cash
Plan on paying for the project in cash? We recommend you put the entire amount into an account from which your builder can withdraw. Ss your builder completes various phases of the project; they can use the funds as needed. They can move from one phase to the next phase, preventing construction delays.
b. What to do if Financing
You may need to set up two separate loans, a permanent mortgage, and a construction loan. The construction loan finances the materials needed to build the house. It is common to have loans go through two different lenders who work together. Mortgage lenders send a preapproval letter to the construction lender. The construction lender then can move forward with finalizing the construction loan.
c. What Down Payments to Plan For
Most lenders will only fund 85 percent of the appraised value of the home. What happens if the total cost of both the land and the house is above 85 percent? Custom home builders require all funds to be placed into a building account. Doing so allows builders to draw from the account until the project is complete. This prevents delays in the home-building process due to lack of funds.
Hopefully, these tips help to prepare you for beginning your home-building process. You’re embarking on a new adventure. The more you have your ducks in a row, the easier the process will be.