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Building Your Dream Home: A First-Timer’s Guide to Navigating the Construction Process


[Updated: Aug 07, 2020 ] Apr 03, 2020 by Maurie Backman
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Some buyers find their dream home by looking through listings and attending enough open houses until the right property pops up. Others take matters into their own hands by hiring builders to construct a home from the ground up. There are certainly benefits to going this route -- namely, the option to customize your living space and have a say in every detail. But there are drawbacks involved, too. Here's what you need to know.

1. You'll need to buy land

You can't put a new home just anywhere -- you'll need to buy a parcel of land that's zoned for the type of construction you're interested in. A real estate agent may be able to help you find land to purchase, or you can search online by area or zip code. Keep in mind that you'll generally need to obtain a permit before construction on your home starts, so once you have that land, contact your local zoning authority to see what it entails. In many cases, though, the builder you hire will take care of your permits for you.

2. You'll need a home construction loan

When you buy a home that already exists, you can finance it with a regular mortgage. When that home doesn't exist, you'll need a construction loan to not only purchase the land your home will eventually sit on but to cover the building process itself. You can either take out a construction loan that's converted to a traditional mortgage once your home is fully built, or you can take out a construction loan that must be paid off once your home is complete. The former is usually a more suitable and affordable option for the average buyer.

3. You'll need to find the right builder

When you're spending the money to construct a home from scratch, you don't want to give that job to just anyone. Rather, you'll need to find a builder with a solid reputation and history of success -- ideally, a builder who already has a list of connections, like an architect, landscape architect, and other professionals needed to turn building plans into reality. Not only should you ask each builder you talk to for references, but you should also see some of that builder's completed homes for yourself to get a sense of the quality of construction.

4. You'll need to create a budget you're comfortable with

The cost of building a home can vary substantially depending on the specifics at hand. Before you get too involved in the process, you'll need to sit down with your builder and team and come up with a budget that works for you. Of course, that budget will be incorporated into a contract you then sign. When building a home from scratch, it's common practice to include an overage clause that allows your builder to spend a certain percentage above the agreed-upon amount to finish the job at hand. That percentage is often 10% but can vary.

5. You'll need to be flexible

As you might imagine, building a new home is not a simple task, and it's common to experience delays and hiccups along the way. Weather issues could cause your builder to fall behind schedule, while delays in permit approvals and inspections could slow down the process. (Keep in mind that when you're building a home, you'll need inspections at various stages of construction. For example, you'll generally need a rough electrical inspection, and then a final electrical inspection later on.)

Also, issues with procuring supplies could make the construction process take longer. For example, if you have your heart set on a certain countertop stone and it becomes available two weeks later than expected, that could set you back. Be flexible, and make sure you have a backup living arrangement in case your home takes much longer than anticipated to become inhabitable.

Building a home isn't for the faint of heart. Your costs could come in higher than expected, you could face extensive delays, and you may end up finding the process of customizing your space stressful. The upside, however, is that when all is said and done, you'll have a unique home that's yours to enjoy, and now that you know what to expect from the construction process, you'll be better positioned to deal with any setbacks that pop up along the way.

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