Creating your dream home from scratch is an incredible and thrilling experience. You are in control of the concept and creation of something entirely unique and totally you – but it isn’t a quick or easy process.
Before building can even start, there are a lot of tasks that need to get done, and a lot of processes you need to follow. In this article, we’ll help you understand exactly what to expect when building a custom home. You’ll be more knowledgeable of what you need to do and how you can help your custom house builder. Plus, you’ll develop a more realistic timeframe for the general construction process.
1. Floor plans need to be finalized
First, you and your architect (make sure you hire one!) need to finalize the house plans. If the plans aren’t 100% complete, they should be as close as possible before construction begins. Change orders, which happen when there are changes either to product selection or design, cannot be avoided. They will happen, and they do delay the original timeframe and construction plan. But if your architect is reputable and really understands your wants and needs then you should expect very few change orders while construction is underway.
It also helps if you’ve agreed upon a reasonable, fair price with your custom home builder. This will help keep cost increases manageable and help you stay on budget.
2. Financing
Great Mortgages
Mortgage options will need to take into account the three parties involved as well as their respective interests: you (the homeowner who wants to find an option that meets your demands), the bank that wishes to guard their investment, and your builder who needs to be sure that there are sufficient funds during the construction process.
Whoever your potential financing partners are, they will check your credit information as well as your builder’s reputation, references, and licensing. They do this to make sure that your contractor has the legal authority to build and to ensure that the risk of funds mishandling or project incompletion is as small as possible. This safeguards your investment.
When building a custom home, some organizations like Wells Fargo offer custom home construction loans. They give you construction financing for up to 12 months and the loan can be converted into a permanent mortgage after the home is complete.
Of course, before settling on a financing plan, you have to understand interest rates. Certain loans give you interest-only payments while construction is underway, but won’t provide you equity after construction. There may also be interest rate changes during construction.
Down Payments
When purchasing loans, you also need to understand what the down payment requirements are. Most loans for custom homes ask for a 20% down payment, but some lenders say that there are programs where you only need to put down 3-5%.
Draws
The way that payments are authorized during construction can also be a headache. Construction loans are never paid out in a single amount; as the construction process is completed in steps, you or your builder will have to request ‘draws’ from your loan to finance the expenses. A bank representative will usually be sent to review and then approve the work so that the bank can approve these draws.
Project Management
Careful project management is needed to make sure that you, your builder, and your bank can work in tandem in a timely manner to collect funds to continue construction. It’s a good idea to collect and keep the draws’ receipts so that you can keep track of your construction loan funds.
3. Great lot selection
The lot that you choose has a huge impact on the timeline of building a custom home. Are you buying a new piece of property, or tearing down a pre-existing home? If you have chosen to build in a development, does the builder you’ve chosen have land for sale?
Finding the right land takes a few steps. Like the process of designing your home, the biggest part of choosing your lot is understanding how you’re going to use the land once your home is complete. Your home’s footprint and location depend on it, after all. Your home also has to match the property that you’re building on and the scale and size of other homes in that neighborhood. This is a great way to make sure that you’re protecting your investment, not paying too much, and not losing money on home and property value over your home’s lifespan.
Additionally, spending a day with the planning and zoning department can help you understand what property is available for you to build your custom home, and what restrictions there are that will impact your dream home. This way, you’ll understand what your property boundaries are as well as your post-construction responsibilities (road maintenance, plowing) and accessibility needed for your property (having to build a road, do utility companies need to access your site, etc…).
4. New building permits
Even if your builder is handling your building permits, as the homeowner, you’re still responsible for them. Also note that every city, town, or borough has their own building department, and the fees for building permits vary.
Apply for a building permit well in advance, as it can take time for approval. The building department will review home plans, specifications, and system designs to make sure that the plans’ quality is sound.
Keep in mind that most building permits are only valid for a certain period of time, so you and your builder need to ensure that your custom home is completed in that time span. If you make significant changes to the design and construction of your house, then the building permit might also need to change. Local inspectors should inspect the job site periodically to see that the building process is going according to the design plans. They aren’t responsible for the quality of work though, that’s still the builder’s job.
Ready to Get Started with the New Home Process?
There might be a lot to do before beginning to build your dream home, but we hope this has helped you get started. If you have any more questions about what to expect what to expect when building a custom home, don’t hesitate to get in touch with us today!