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How to Build Your Custom Home

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Building your own home can be a fun and exciting process, however, it is a major undertaking with lots of details to consider.  It is our hope that this overview will help you understand those details better and help pave the way to your new home.  As with any major undertaking, it is always easiest to view it in smaller steps.

1) Determining Your Wish List

The first step you will want to consider in building your own custom home is to build a wish list of the features you would like.  These features might be

  • Proximity to Family – Do you want your house to be close to siblings or family?  Would you like your house to be a gather locale for family events?
  • Family-friendly Neighborhoods – Consider the school, park and safety statics of the neighborhood.  Do you want to a cul-de-sac at the end of quiet street?  Or would you like the easy commute that bus lines provide in the busier parts of a metropolitan area?  Do you want a fenced in back yard or open acreage the kids or grand kids can go out and explore?
  • Exterior Appearance – Do you value a unique or traditional design?  It is possible to use exterior molding to give your home a unique one-of-a-kind look.
  • Storage – Do you have hobbies that require additional space or storage?  Adding space to a garage or attic is a great way to create storage space.
  • Space to Entertain – Do you entertain guests frequently?  Do you love to cook or hold dinner parties?  Consider adding a bigger kitchen that has double ovens, an island and more cabinet and counter space.

2) Prioritizing Your Wish List

Now that you’ve got your wish list, it is now time to compromise and prioritize the items that you need to have versus the items that you would like to have.  The items that you need to have provide the most impact on you and your families quality of life.  The items that you would like to have or would be nice to have won’t have major impacts on the quality of you and your family’s life if you did not have them.  One example of a prioritized list might be

Primary Needs

  • Home Office
  • Three bathrooms
  • Spare bedroom
  • Three-car garage
  • Double-sink in the master bathroom
  • Family game or theater room
  • Master Suite on the main floor

Secondary Needs

  • Granite counter tops in the kitchen
  • Heated flooring in the kitchen
  • Soaking tub
  • Walk-in shower
  • Gas fireplace
  • Outdoor cooking area

3) Determining A Rough Budget

At this stage of the project, it is a good time to start determining your affordability and consider the following:

  • How much have you saved up?
  • How much could you afford in monthly payments toward a mortgage is one if required?
  • Have you taken into account property taxes, hazard insurance, utilities expense?
  • If you currently own, how much will the sale contribute to the new home?
  • How much do you want to spend on the lot?  Do you want a view or to be on the waterfront?

4) Get Credit Approved

A credit approval determines whether a lender is willing to lend you the funds needed to build your home and is based on factors such as your credit history and debt-to-income ratio.  Getting credit-approved as early as possible will help determine your budget and consequently the home that you can build.  Make an appointment to speak with a loan officer to solidify your budget and learn more about the new construction process.  With a credit-approval in hand you can confidently move forward in the next stage of the new construction build process.  Note that even if you don’t need a lender and you have the funds to finance your own construction, it is always good idea to bring on board because they become a vested partner in your project and can provide assistance in ensuring proper completion of the project.

5) Choosing Your Home Site

Here are some questions to ask when considering where to build your new home:

  • Do you want to be close to shopping and dining or is privacy and more acreage a preference?
  • Do you have children?

If so, the quality of the neighborhood with amenities such as parks and schools will affect your decision.   Lots closer to metro areas tend to be smaller and more expensive than those further from town.

Geography is also another factor.   Lots in the hills has the potential to offer great views but are typically more expensive especially the more steep the land becomes due to special construction needs required.  Consulting with specialists will incur additional costs to the project.

6) Purchasing the Lot

Once you have found your home site, you will need to purchase it.  This can be accomplished using a lot loan.  This allows you to secure the lot so that you can safely and comfortably hire a builder, firm up plans and purchase the required building permits from the municipality.   When you are ready to start building your new home, the lot loan can easily be transferred over or combined into the construction loan.

7) Creating a Vision

When envisioning your newly complete home focus not only how it will look but also its function or how you will use it.  Here are some questions to ask yourself when envisioning your new home:

  • Do you want the master bedroom on the first floor?
  • How easy will it be to get from the kitchen to the dining room?
  • Will you mostly be entering the house through the front door, side door or garage door?
  • How often do you entertain?
  • Will your family be gathering together during the evenings?
  • Do you need office or hobby space?

Once you have determined how you want your home to function now is the time to focus on how it will look.  You can get ideas from driving around neighborhoods of home styles that you like or you can get ideas from home design magazines or websites.

Generally the more angles a home has the more costly it is to construct, whereas, the more rectangular it is the simpler and hence less costly it is to build.  Intricate molding, features and trim will also add to the cost.  Organize your ideas into a binder along with your budget and bring them with you when you consult with your home designer, architect, or general contractor.

8) Hiring Respected Experts

Hiring reputable experts when building your new home will prove invaluable.  These experts will be able to help you with determining your budget, drawing up plans, making informed design decisions and overseeing construction.  Make sure that the experts you are hiring have all of the required business licenses and can sufficiently answer all of your questions.

A good place to get a list of reputable experts on building your home is from the lender.  The lender will need to approve any experts that you hire and often times they have a pre-approved list of experts that they have worked with before and can recommend.

Depending on the requirements of your project some of the experts you may need to hire are as follows:

  • Architect – An expert in the design of your home for both form and function.  They will subcontract the work out the tasks required realize the design of your home and paid based on a commission from the total project cost.
  • Home Builder – Usually have in-house teams, without much need to subcontract out, that they coordinate to build your home.  They will have their own architects or can work with one that you have chosen.
  • General Contractor – These individuals will oversee the day-to-day operations of the project. They will hire out to subcontractors the separate tasks required to complete your project and are paid a percentage of the total project cost.
  • Interior Designer – Artistic professionals responsible for the design and realization of your home’s interior space.  They can be self-employed or employed by design companies or retail outlets.
  • Soil Engineer – These individuals are responsible for ensuring the soil quality of the location for your new home. or any foundation issues that need to be addressed such as drainage, erosion patterns or weight-bearing capacity.

9) Getting Your Construction Loan Approved

New construction financing is a bit more involved than that of a standard home mortgage.  Typically it is phased into two stages: a construction loan and a refinanced permanent resident mortgage.  Part of the lender approval for the construction loan will be your ability to refinance into the permanent resident mortgage.  To obtain approval for the construction loan will also need the following:

  • Architectural plans include site plan
  • Description of materials and their specification
  • Cost estimate of materials and labor
  • Acknowledgement of any prepaid items along with receipts
  • Legal description of the property and sales contract
  • Contractor’s license and tax certification
  • Building permits
  • Proof of builder’s risk insurance

10) Building Your Home

During construction, draws from your construction are made based on the amount complete.  These draws are then used to pay the experts you have hired.  Amount completed is assessed by the lender via periodic, typically bi-weekly or monthly, inspections of the construction.  While the lender is there to assist that the project goes to completion, it is ultimately your responsibility to ensure that construction goes to completion.  Make sure to communicate regularly with all parties involved and resolve any issues that come up in a timely manner before they get out of hand.  By doing so you will inevitably move into your new home and enjoy the fruits of the labor that went into it.

Alliance Development Partners has over 30 years experience in the home-building process.  Please contact us for more info or start your new home-building experience.