Post details: Walk Through the Building Process


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Walk Through the Building Process

While actual construction normally takes six months or less, the ideal home can be years in the making.

Setting a Budget

The key to developing a realistic building budget is to give yourself enough time to research home plans, make product selections, and find out what additional costs apply to your area. Before number-crunching begins, you must have a clear mental picture of your dream home. There are plenty of places to get ideas, including magazines and "parades of homes." Whether you're going to build from a stock plan or design a custom home, studying plans is a good way to determine how much square footage you need and what kind of house will fit on your lot.

Make a list of the products and finishes -- doors, windows, flooring, cabinetry, countertops -- you would like, and find out approximate costs. Once you've decided on what kind of house you want and have consulted a lender to determine how much you qualify to borrow, obtaining an estimated cost per square foot will help you figure out what you can afford.

If you're buying a stock plan, find out if the plan service will estimate the material and labor costs of building the home in your area. If not, your local home builders association should be able to provide average square-foot costs. Remember that the square-foot cost estimate is a very broad, general number that should only be used for guidance purposes. You won't know how accurate it is until the house is designed and construction bids are obtained.

Finance and Home Plans

Most lenders advise that you become prequalified for a mortgage. You can do this as much as a year in advance of starting your building project. When you build a home, you apply for two kinds of loans: a construction loan and a permanent loan. The construction loan is short-term and covers the time it takes to build your home. During this time, the loan is paid to you in installments, or draws, to cover building costs as they occur. When the term of the construction loan expires, it's replaced with a regular mortgage, which usually has a term of 15 to 30 years. Some lenders package the two loans into a construction-permanent (or "construction-perm") loan. In this case, when your house is completed, the construction loan automatically converts to a permanent loan.

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