Building a custom home is a dream for many people, especially for the first time home buyer. Unfortunately, if they are unprepared for the possible additional costs involved or the sudden changes in budget, it can be a very stressful and costly one. Planning and budgeting beforehand is paramount, and knowing the process involved will help the construction and lending process go more smoothly.
If using a Home Building service, a lot of the process will be managed and aided by them. Most companies now have a financing partnership with lenders and some even offer no down payments, and help covering closing costs. A few of these home builders will even help you with building your credit, or repairing bad credit. However, be aware that all these companies do have partnerships in place, so shop around for options and investigate their reviews. These homes are normally built from a selection of pre-designed floor plans, in already established or newly built communities. There are usually allowances in place, so you can pick and choose from several options to make your home tailored to your tastes, without going over-budget.
Home builders wishing to purchase a specific plot of land and build on it, will need to go through the process on their own, and get a construction loan as well as a mortgage. In this case, buyers will need to be extremely aware of all the additional fees that they will possibly incur, because they’re not already added into a package deal. These fees can be for permits, lot preparation (this varies depending on the land) and any cost of hooking up utilities.
Planning a new house without the aid of a Home Building company requires a strict budget, with the expectation that the budget will run 10% to 20% over. First, go to lenders and find out how much of a mortgage your eligible for and adjust your borrowing plans and expectations. It is important to choose the land that will be built on prior to choosing the floor plan, and factors like drainage, zoning, building codes and even soil type will mean changes to your plan and budget.
The next best step, is to hire a builder (or contractor), who can then take over a couple of other tasks for you. Through contacts, they should be able to help you enlist the services of excavators, designers, surveyors, even an architect if needed. If you are choosing a stock plan, small modifications won’t be that much of an issue. If you are making a custom home, or major changes to the floor plan, then a licensed architect will be needed.
Before building commences, there must be a signed and dated contract, with builder and architect both signing. The contract should have all details in it, with all parts of the house being built clearly documented, and all further amendments to the agreement need to be changed in that contract.
Once the mortgage lenders are happy, a construction loan is issued, and construction begins. Once construction is over, there is a closing, and your construction loan becomes a mortgage.