We want to build a house! Now what? Step 3: find a builder and some land!
Choosing a builder
This is when it starts to get more real and feel more fun! We simultaneously looked for land at the same time we shopped for a builder.
1.) Design a "must-have" list of features. The more accurate the better because this is the list you will take with you to meet builders. They will use this list to give you a ball-park price.
How many bedrooms and bathrooms?
How many square feet?
Open floor plan?
First floor master?
Ranch or colonial?
Dining room, office or both?
How many car garage?
What height ceilings?
What type of finishes? Granite or quartz counters? Black windows?
2.) Do you want a custom, spec or production home?
Production Homes. Ryan and Pulte tend to be examples of production homes. They are builders who mass produce in neighborhoods. They all tend to look very similar on the outside and have an array of floor plans you can choose from. They have floor plans and finishes that are standard with options to upgrade. If you want an affordable option, this is your best bet! The donside: cookie cutter appearance, small yards and you unfortunately usually sacrifice quality. Don't come at me for this comment! Haha. We currently live in a Ryan home so I am speaking completely from experience! We would never live in this type of home again. Definitely affordable but we are frequently reminded of the lack of quality in the home on a daily basis.
Spec homes like Wayne homes, Schumacher, Diyanni are a nice middle ground. They also have standard floor plans but will typically build on a lot of your choice unlike production homes who only build in a specific neighborhood. Usually they have a list of standard features and upcharge for upgrades much like production homes. Definitely better quality than a production home but you also can blow your budget pretty quickly by upgrading! My parents built both a Wayne home and a Schumacher home, so again, I am speaking of experience with the quality of the home.
Custom builders typically create a one-of-a-kind home that offers an even greater range of design choices that's often built on a single lot. These homes are typically more expensive and higher quality but allow you to completely design a home catered to the needs of your family.
3.) Pick a builder!
Once you decided what kind of builder you'd like, shop around! We met with 6 builders but you should meet with as many as you need to until you find the right one!
Research parades of homes in your area so you can walk through their houses
Visit model homes
Present them your list of must haves and ask for a price.
Ask for a list of "standard features". These are selections included in the price. One builder may include quartz as a standard where another may only offer laminate. Another example is some builders included soft close cabinets where another builder would charge extra.
Ask if you can buy items out of pocket and if they will credit you at the end of the build. We fell in love with a lot of things that either weren't available at their supplier or we could get cheaper elsewhere. This was important to us to be able to do and our builder assured us this was no big deal. So far we have purchase our tile, sinks, cabinet hardware, barn door and pantry door on our own and they will just credit us at the end.
How much are each of their allowances? (flooring, faucets, lighting, etc.) Make sure your selections would reasonably fit into those allowances.
To be honest, we chose our builder solely based on our first impression. A friend of ours had built with them last summer and had an outstanding experience. We never even met the owner prior to signing our contract, only the architect/sale manger. They were extremely quick with responses and clear communicators which was exactly what we wanted! We easily weeded out anyone whose prices per square foot were too high, and anyone who took longer than 24 hours to respond!
We met with Wayne Homes, Schumacher Homes, Diyanni, Grisez Homes, and Touchstone before settling on our choice.
You can explore builders at the same time you are looking for land.
Finding the perfect lot for your build
In our area, land was hard to come by so we decided on a builder before we found the right lot. Some questions to ask yourself:
Do you want to be in a neighborhood? I would've loved to be in a neighborhood without an HOA but ultimately wanted the land to feel more in the country. We were looking for old farmland.
Is the neighborhood a part of an HOA? This ysually means you pay a monthly or yearly fee and usually have rules on your build. This was a hard NO for us, haha.
How many acres do you want? We wanted 2 or more.
What school district is it in?
What county is it in?
Are there mineral rights on the land you will inherit?
My only advice here is to be patient and trust God. Drew and I had been looking for a 2+ acre lot for 6 months and nothing had really come up. We had found one we thought we liked but then our realtor (and dear friend) found out that it wasn't approved for culvert which meant we wouldn't be able to place a driveway. Drew and I had kind of given up in December 2019. We thought "God will just show us what we are supposed to do. Maybe He doesn't think we should build a house right now."
Of course the next week, some old farmland came up for sale in our area and we called our realtor and placed an offer the same day for full asking price. They accepted! We had our lot, and chose the builder so this is when it really started to get fun!
Let me know if you have any questions and stay tuned for my next post on building your floor plan!
We want to build a house! Now what? Step 2: find a bank
So, you've figured out how you're going to pay for your new construction loan. What's next?
The next step is finding a bank!
1.) Do they offer new construction loans? Surprisingly, not all banks offer new construction loans.
Construction to permanent loan
This type of loan (also known as “single-close” construction loans) covers the costs of construction on your future home, in phases, while it’s being built. The lender who approves you will pay your builder in installments during each phase of your construction process. These payments are called “draws.” For example, if it takes $50,000 to complete the first phase of building your home, your payment will be toward that $50,000, and not the entire purchase price of your project. The lender will usually perform progress inspections as funds are requested throughout the construction phases: for example, pouring the foundation, beginning framing, installing plumbing, and so on until your dream home is completely built. With a construction-to-permanent loan, you’ll make interest-only payments during the construction phase, and will only pay interest on the loan amount required to complete that phase. Interest rates are always variable for that duration. They fluctuate with the prime rate.
Once your home is finished, and you move in, the construction-to-permanent loan rolls over into what will be the borrower’s mortgage. This allows you to only pay closing costs once. This is the type of loan Drew and I chose.
Construction only loan
A construction-only loan covers the construction of your home, in full, up front. The borrower pays the closing costs. When construction is finalized, the construction debt becomes your mortgage, which is considered a second loan, for which you pay closing costs a second time.
Construction-only loans are best for borrowers who have large cash reserves, or who want to shop permanent lender options while their home is being built. It’s also an option for people who will live in their current home while their new home is being built.
NOTES & TIPS: A construction-only loan requires little or no money down, because your current home is used as collateral during the building phase. Your payments during construction are on your entire construction loan (not broken up in smaller loan amounts that cover each phase of the build).
From Reinbrecht Homes website. https://www.reinbrechthomes.com/blog/new-home-construction-loans-explained/
2.) Ask about their interest rate. Interest rates are at an all time low right now which is definitely in your favor. Talk to multiple different banks and shop around for the lowest interest rate.
3.) Work with them to find out what your budget is for the total project. The banks have the ability to do a mortgage estimator that can tell you approximately how much your mortgage, insurance and taxes will be each month. This is a decent way to know what your total budget will be for the build.
4 .) How much do they require for a down payment? Factor in how much they require for a down payment. We were able to get a new construction for with 11% down, where other banks wanted 20% down. The downside to borrowing with less than 20% down is being required to pay PMI or private mortgage insurance. There are some loans like Fannie May where you can get away with not paying PMI and only putting 10% down but they typically have higher interest rates. My suggestion is to do what's right for your financial status long term. For us, it was better for us to pay PMI because that falls off when you hit 20% of your loan whereas the higher interest rate is stuck with you for the duration of your loan unless you refinance.