Building a new home is one of the most exciting adventures you will take on in your life. But it can also be one of the most stressful. This step by step guide will help you understand how to build a new home and gain valuable tips to reduce problems.
Who is this article for? It’s for the new home buyer who wants to have their home built by a professional builder, whether it’s a custom, spec, or tract home.
Your Role in the Home Build
Your role in the home build is to handle the management of the lender, surveyor, builder, architect, interior designer, and any other team members. This includes interviews, hiring, holding accountable, meetings, and if necessary, firings. To better understand your role and what you should do as the homeowner in a home build, check out How to Build a Home – The Buyers Role.
I have witnessed many new home buyers become disenchanted during their new home build because one of their team members did not live up to their expectations. The interview process is very critical to find the right team members.
Prepare for your interviews with potential team members
If you take the time to prepare yourself for each interview, you can conduct meetings that will help you discover what you need to know about the company. And after the meeting, evaluate your discovery. Do they match your expectations? Do they have experience and resources? Are they easy to get along with? Do they listen to you? Are they pushy?
Does this mean there won’t be problems? No. But you can eliminate a lot of them by choosing your team wisely.
If you would like to have a guide that will help you get the right builder and to learn what to ask him to make sure you get the house you expect, check out my guide “How to Find, Interview, and Vet a Home Builder”. It takes the guesswork out of it, giving you peace of mind and confidence.
Let’s start with the first step in the home building process.
1. Financing your new home build
A critical part to build a new home is the funding. And, unless you have deep pockets, you will have it financed.
How much can you afford to spend for a new home build?
First, do some preliminary research to discover what you can afford and if you can buy your ideal house for that price. There are many online mortgage calculators that can help you get a good idea of what you can afford. Typically, the down payment required is 20% – 25% of the total project, so keep that in mind when running your numbers.
If your self-analysis looks good, then talk with a lending specialist. They will help you find out your credit score and how much of a loan you can get.
When you are with the lender, get their requirements for a new construction loan and home loan. Items they may require you to have are a qualified builder, floor plans, and appraisal.
Builder owned lot
If the builder owns the lot, you will purchase the completed house and land from the builder using a typical home loan. First, the builder and you sign a contract for an agreed price, and he fronts the cost of the build. Then, he builds the home to your specifications. Finally, you purchase it with the money from a home loan.
If you are building a home on land that you own, you will have a construction loan during the build.
There are 2 common types of construction loans: a Construction to Permanent Loan and a standard Construction Loan.
A Construction to Permanent Loan provides the funds to build your home and then converts to a standard mortgage after the construction has completed.
During the construction of the house you pay interest only. After the completion of the home, you start paying the principal and interest on the mortgage.
A Construction Loan is short term, interest only payment during the home build. You pay off the construction loan with money from a permanent home loan when the home is completed.
It’s important to obtain your permanent loan pre-approval from a lender before beginning construction to make sure you are qualified and able to purchase the home at the time of completion.
2. Determine lifestyle and values and design your home to it
You might ask, “What does my lifestyle and values have to do with building my house?” Actually, it should have everything to do with it.
Our lifestyle and values define who we are, and our home can complement those so that we can live a more fulfilling and productive life. For example- are you eco-friendly, family oriented, business minded, retired, have children, like vacations, enjoy certain cultures, like fires, love to swim, an entertainer (the list is endless). Whatever of these is important to you should be considered, because your house can incorporate features to help satisfy your needs and make you happy.
To help you through this process, write down what’s important to you in life and what things are part of your life, now and in the foreseeable future. Then picture different features of your house that can help fulfill those. Look at books, articles, and, as we’ll see later, talk to your architect, interior designer and builder to get ideas.
An important feature you want to start considering at this stage is what style or design of home you prefer. Do you like the look of a modern home, cottage, colonial, and so on?
Use 3D designs to visualize your home
A great aid in designing and visualizing your home is with 3D design software, such as Planner5D. This software is intuitive and beginner friendly, yet powerful. The value of creating the design from the beginning stages with this software is indispensable. Why? Because you personally are the one who really knows what you like and want, and the 3D design software will help you bring that out. In turn, the architect can use your design, knowing what you are looking for in a home. He will use it to draw up your home, even enhancing your ideas.
It’s not necessary to know every aspect, feature, and style of your new home at this point, but you want to get the juices flowing, so to speak. Keep working on your 3D design along the way, and the complete picture will come about.
3. Have an attorney to help prevent and assist with contractual issues
Building a new home is one of the biggest financial decisions you’ll make in life. And many people go into it without knowing how to protect themselves.
If you are good at reading and negotiating contracts, then you may feel confident in drawing up or using a new home build contract. For example, I am not an attorney, but I have done my research on how to protect myself, get what I expect, and have the ability to come to a mutual agreement when entering into a contract. I don’t have a problem using most builder’s contracts because if I want something changed, we can just modify the terms.
On the other hand, if you don’t like negotiating contracts and/or you’re concerned about getting what you expect and being protected, then having an attorney review the builders contract or write up your own before you sign it is important. For the protection you’ll get, the cost of an attorney is small.
4. Find the best builder to build your new home – the biggest and most valuable part
Finding the right builder is the key in how to build a new home the best way possible. Why? Because if you find the right builder, they can make your build and experience go as smoothly as possible. They can also be a valuable resource with their contacts, such as architects, lenders, and designers.
How to find the right builder
Consider the area you want to build in. What builders are there? You can find them by driving around and searching the internet by location.
After you’ve found them, then find reviews on them and talk to homeowners that have had homes built by them. Ask the homeowners what went well and what didn’t?
What you do next is the most crucial part in finding a qualified builder. You need to have a hard core, one on one conversation with the builder. No matter how good the reviews are, you need to see for yourself if this builder can deliver what you expect.
How to interview a builder
First, go over all the notes you wrote on your lifestyle, what you value, and features you want. Next, write a list of your expectations about the home and the builder. Write down things like- cost, fees, communication, change orders, completion dates, delays, his/her organizational skills and implementation plan, and so forth. The goal is to see not only if the builder can deliver a house you like, but can he do it efficiently, productively, timely, and be a problem-solver.
There are many builders who can build you a home but finding one who really cares about what you want and can manage a project well, can be difficult. If you would like help finding and vetting a qualified builder, let me know. I’d love to help you. Contact me!
5. Pick a lot or land and Surveying
Picking a lot to build a home on is one variable that can be very easy or very difficult. It depends if you have specific requirements or not.
What aspects of a lot are important to you? Do you want a big flat yard to have outside activities and games? Or would you like a small yard to maintain? Do you want a secluded or scenic location? Ask yourself these types of questions to determine what you’re looking for in a lot and then go see what you can find.
Once you find your lot/land a survey will need to be performed. Typically, your builder will have this taken care of but in certain scenarios you may have to hire this out.
The survey determines the property lines and the lay of the land (topography). All this information is used by the civil engineer and architect to draw up plans for your new home.
6. Hire an architect and have house plans drawn (Custom Homes)
Depending on whether you’re having a custom home built or buying a subdivision tract home, determines if you need an architect or not.
In tract homes, you typically won’t need to hire an architect. Instead, the builder will have a list of house models and floor plans to choose from. And within those plans you’ll have specific options to choose, like cabinet style, door handles, flooring, and so on.
If you’re building a custom home, the world is at your fingertips. Because, if you have the money, the architect can design anything you want.
Choosing the right architect
Once again, we are going to revert back to your lifestyle and values. When choosing an architect you want to find one that designs homes that are similar to your style. Many architects get into certain niches and don’t work well in others. I have seen architects draw up plans out of their norm and it was a disaster. The house was designed poorly, which affected the construction process and the home owners expectations. For example, if you’re into modern homes, find an architect that specializes in that niche. If you like big mansions, find someone who specializes in it.
After you find some architects, interview them. Just because you find one who fits your style doesn’t mean they’re the right one for you. Tell them about your lifestyle and values. See how they react. Do they understand you, and can they see your vision and help you conceptualize it?
In the end, you want to choose the architect who you feel can take your lifestyle and values and incorporate those in the design of your new home.
7. Hire an interior designer or how to be your own
Hiring an interior designer depends on your budget and design skills. If you have the money and don’t have an eye for coordinating interior features, then an interior designer can be a good investment. On the other hand, designing your own house can save you money and be very rewarding. Let’s consider both.
Using and picking an interior designer
An interior designer can coordinate, virtually, any feature on the inside of your home, from floor to ceiling. They can, also, work with your architect and builder to include any features that are part of the construction of the house.
Picking an interior designer goes along with the concept of hiring an architect. Know your lifestyle and values and make sure you discuss these with the designer. Also, tell them any particular color schemes and styles you like.
A good interior designer should ask the right questions to determine these things and then design your home accordingly. It’s good for them to make suggestions, but it’s not good for them to force their preferences in style. Big egos will not get you the house you expect. If you feel like they’re not the right fit for you, it’s better to go with another designer.
How to be your own interior designer
With today’s technology and open sources to purchase goods, you can easily design the inside of your own house. And for many, this can be fun because you have direct control on creating the finished look of your home.
Your builder can be a valuable asset in directing you to different suppliers and/or options that are available to you. In spec and tract homes, some options are given to you directly by the builder, things like flooring, cabinets, and paint colors. While other items you will have to pick and purchase, such as window coverings, furniture, and decor.
Also, you can use the internet to find a vast source of resources to help design the inside of your home. There are sites and software specially made to help you with this. Do some searches on designing the interior of your home. Search for various products, such as, flooring, paints, window coverings, etc. These product sources want to help you visualize your home, so they have put together aids to do that. With the click of a button you can pick colors, patterns, and styles and see it displayed.
8. Build your new home
Watching your home be built is the most exciting part of the home building process. The basic stages are site work, foundation, framing, electrical and plumbing rough-in, insulation, exterior finishes, drywall, and interior finishes. If you would like to know the full and detailed home building process, check out my guide “What is The Home Building Process?”.
The builders role in building your new home
As we discussed earlier, the builder has the biggest and most important part of new home construction. The builder’s role is simple to explain. He controls and oversees almost every facet of the home build, from start to finish. This is a heavy responsibility because it takes a lot of good organization and coordination to build a house. And the builder must wear many hats to get the job completed in a fine manner.
In addition to my guide that helps you learn how to find, interview, and vet a home builder, I also offer a service that specializes in doing this for you. If you would like help getting the right builder and the home you expect from them, contact me.
2 of the biggest inefficiencies in a new home build is lost time and poor quality.
When a builder is proactive in the build, it goes smoother. Why? He is actively involved- planning, ordering and delivering materials, hiring subs-contractors, and checking on the progress and quality of the build.
If he’s not proactive, the build takes longer because everything is an after-thought and a reaction to what is needed. The quality also suffers because they are not inspecting the work. The build turns into rushing to get it done with little regard to the end result.
As the new home buyer, you need to be aware of these signs by conducting regular meetings with the builder. In these meetings, you want to see from him what is being accomplished and what is planned next. You also want to do quality-check inspections of the home as it’s built.
Now, as a buyer, it may be very difficult to do a quality-check inspection because of a lack of experience and knowledge. One of my services includes helping with these inspections. Contact me to learn more about this service.
9. Final Inspections, close and move into your new home
After your builder has all the cities final inspections passed, you will do a final walk through of the home.
At this point, you will be checking mainly for cosmetic flaws and functionality of all working parts- doors, windows, switches, faucets, etc. Anything needing attention should be noted and addressed.
If you’re buying a home from a tract home builder, you will close and ownership on the house at a title company.
Any final payments and mortgages will take place at the closing table.
Congratulations on your new home! It’s time to move in.
10. Maintenance and Protection of your new home build
You have invested a lot of time, effort, and money in your new home. And it will be a source of joy for you. But don’t neglect it. Your house needs maintenance and protection.
Take the time and effort to make sure everything in your home stays maintained, such as HVAC, flooring, gutters, fireplaces, plumbing, insect control, etc. Doing preventive maintenance helps reduce problems and expenses in the future.
Lastly, make sure to have adequate homeowners insurance. One of the biggest investments in your life can be covered from financial disaster, if something should ever happen to it.
Building a new home is a very exciting time in your life. I hope this article can help you through it and alleviate some of the stress. If you would like any assistance in your build, please contact me. I can help ease the process and give you peace of mind.