Figure Out What You Can Afford?
- Before outlining the budget, ask “What can I afford?” Most homebuyers
don’t have the luxury to pay for a house build from cash. A mortgage or
construction loan will be needed. Use the “28% Rule” - no more than 28% of
monthly gross income should go to the mortgage payment — principal, interest,
taxes and insurance.
Get Your Home Building Budget In Order.
- To prepare for the unexpected, include a 15-20% contingency in the
- Square footage typically represents the single biggest driver in
determining home building costs. Go online and talk to contractors to find out
what the cost is to build a house in the area. For example, most recent data
from the U.S. Census indicated the median price per square foot for a
contractor-built, single-family home was $116.16. However, the price per square
foot ranged from a low of $102.93 in the South to $139.36 in the West!
Get House Plan Blueprints.
- House plan blueprints are essential for getting final approval on a
construction loan. The bank will want to see detailed construction drawings and
a lot plan.
Get Three Bids From Contractors.
- Share your house plans with contractors to first solicit feedback and
then get formal bids. It is best to get at least three bids from reputable
builders who have experience in your area. The formal bid document from your
contractor should serve as the basis for the detailed budget and construction
timeline. However, it is not all-inclusive.
Get A Reputable Builder.
- A reputable builder will be expected by the bank. It is not unusual for
a bank to have the builder complete a builder review application as part of
this process. The lender wants to make sure that your builder is licensed,
insured and has a successful history of completing similar projects.
Be Prepared To Make a 20-25% Down Payment.
- Be prepared to make a down payment of 20-25% of the total house build
cost with the bank as part of receiving the construction loan.
Remember That Details Matter When Seeking Pre-Approval
For A Construction Loan.
- There are multiple types of construction loans in the marketplace. The
most popular type is perhaps the “construction-to-permanent” loan. The loan
finances the construction of the house. Upon completion, the loan is then
converted into a mortgage.
- To get approved, homebuyers need to be organized, well prepared and have
very good or excellent credit.
Backup Your Budget With A Detailed Timeline.
- When you submit your detailed construction budget to the lender for
review, be sure to include both hard and soft costs. Back up your budget with a
Tim Bakke is
Director of Publishing for ThePlanCollection.com. With more than 30 years
of publishing experience in magazines, books and online, Tim regularly
writes about house plans, home design, new home construction, home remodeling
and achieving your dream home.
THE PLAN COLLECTION
The Plan Collection offers more than 22,000 affordable house plans developed by the
nation’s most talented architects and
designers. Through the use of pre-drawn yet customizable plans, both builders
and those looking to build can develop their dream homes at a lower cost. In
addition to the wide selection of available plans, the site offers detailed
how-to articles and knowledgeable customer service representatives to help
visitors find swift answers to their questions. For more information, visit https://www.theplancollection.com/.