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Building a new home is exciting—and can be entirely overwhelming. According to PsychCentral, one of the best ways to manage feeling overwhelmed is to focus on what you can control. Leave the stuff you can't control to the experts in your home buying process.
While there's no one-size-fits-all approach to building a home, there is a general timeline you can bank on to make the process a little easier. Here's a sample timeline from Goldenwest Credit Union.
Find and purchase your lot
Finding the perfect lot is the first step in the building process—but you might be confused about financing a new lot. Goldenwest has improved lot loans as low as 6.750% (7.201% APR). An improved lot means that it has been upgraded in preparation for building a home.
When you secure a lot loan, Goldenwest will credit half of the origination fee towards your Goldenwest construction loan when you're ready to build. Goldenwest lot loans are for a 30-year term with a 5-year call and require a 20% down payment.
Research your financing options
When building a home, researching financing options is crucial for satisfaction and financial stability. Goldenwest offers two construction loan options. The first is a one-time close loan where you secure a commitment and interest rate with your long-term financing at construction closing, and the loan converts to a long-term mortgage after construction.
The second option is a two-time close loan where you apply and qualify for a construction loan and a separate long-term mortgage, and the construction loan is refinanced into a new, long-term mortgage.
Goldenwest requires as little as 10% down and offers personalized down payment requirements based on your financial situation. Putting more money down will lower your overall loan amount and monthly payment. Keep in mind that expenses like landscaping, fencing, and pools may not be included in the loan.
Design your home
Choosing the perfect home for your lifestyle, design aesthetic, neighborhood and lot might sound a little intimidating. Choosing an overall style can help guide your design choices.
Next, consider the size of your home, keeping your lot size and bedroom/bathroom needs in mind (along with any must-have extras, like a home theater or a garage that can accommodate a boat). This will help you better estimate the square footage of your home.
Be sure to check the Covenants, Conditions & Restrictions (CC&Rs) that define what is allowed and not allowed in your development or subdivision. These may include requirements for exterior colors, building materials, and even the style of the home. If your home is part of a Homeowner's Association (HOA), there may be additional requirements.
Consider custom vs. stock house plans
Builders offer a variety of predetermined house plans (or stock plans) for certain subdivisions. Typically, these companies will have set allowances for most of the home's characteristics with the option to pay for additional upgrades.
Stock plans are a great option if you're looking to move into your new home faster—or if you're overwhelmed at the idea of designing a home from scratch.
A custom home usually requires hiring an architect to design an original plan. Since architects often work through referrals, doing some research (like speaking with friends who have designed their own homes) will help you to find the right person. Once you have selected your architect, you'll work through numerous updates and revisions before you settle on the final set of house plans.
Choose your builder
Choosing the right builder is crucial in ensuring that your dream home is built with quality and meets your expectations. The National Association of Home Builders suggests making a list of possible builders in your area, asking homeowners who recently completed their building process in the area, or get referrals from your friends, family, architects or Goldenwest's preferred builder list.
When considering a builder, always ask for references and visit homes the builder previously built. Pay attention to the quality of finish work, paint, flooring, cabinets, and exterior materials. Ask each builder about their experience, licenses and insurance, the number of homes they build annually, their specialties, standard features, construction process and timeline. Get a feel for their communication style and make sure you have a good rapport from the onset.
Finalize builder contract and cost breakdown
After negotiating the bid and timeline with your builder, they should provide a final cost breakdown or purchase price along with a contract. Builders structure their profit in two ways: fixed-price or cost-plus. A fixed-price contract includes the cost of materials, labor, and profit, while a cost-plus contract depends on the actual costs plus a fee for profit or overhead. It's crucial to understand which structure your builder is using.
You should also budget for a contingency, which covers unexpected events and overages. Your mortgage expert will analyze and calculate the loan numbers based on the cost breakdown and contract and provide you with an updated Loan Estimate for your closing costs.
Close your construction loan
After meeting with your Goldenwest mortgage expert, your mortgage loan processor will contact you for required information and documentation from you and your builder. To avoid delays, this is around the time you'll apply for a building permit. The appraiser will review your plans, cost breakdown and finish quality to determine the appraised value of the completed home, after which your loan will be submitted for underwriting and review. Once approved, you'll receive an initial Closing Disclosure for review before signing final loan documents.
Complete construction
Your mortgage expert will be available to answer questions throughout the construction process, and Goldenwest will conduct monthly inspections to ensure the project stays on budget and on time.
Around the time cabinets and countertops are installed, you'll want to think about your long-term loan. If you closed under the two-time close construction loan, your mortgage expert can watch the market and rates for your long-term loan. Once your home is complete, you will submit final draws, and the construction loan will either be modified to a long-term loan or paid off with a new loan.
If you're considering a new build, start with a seasoned professional on your side. Goldenwest Credit Union can help you every step of the way. For more information, visit Goldenwest.
