Building a New Home
Have you ever wondered how new construction works? There are numerous examples and explanations given so having a clear understanding can be difficult. A good way to learn about new construction is to contact a real estate agent or lender who has experience handling new construction loans. They can provide an overview of the process that minimizes confusion.
In general, buyers looking to build should start the process by meeting with a builder and architect. Not all builders or new construction companies build the same way. Two types of builders are tract builders and custom builders.
Tract builder companies have portfolio floor plans buyers can view, which normally differ from company to company. Portfolio floor plans can be restricted in design while others are semi-custom allowing for rearrangement of rooms, options, or finishes. In terms of financing, most tract builders have a set method of payment.
Custom builders are just that. They build homes customized to a client’s preference. Custom builders offer the most flexibility, as buyers are not limited to certain floor plans, finishes, or service vendors. What this means for a homebuyer is that from the beginning, the buyer has more power in deciding their budget potentially giving them a significant amount of equity prior to occupancy and an affordable monthly payment.
Deciding on Land
With either builder type, the buyer must choose what land they wish to build on. In most cases with tract builders, land has been prepared for construction and utilities made available. This convenience is not always available with buying land elsewhere. Acquire the assistant of a realtor to help you with your land search. Buyers may discuss payment up front with the agent but in most cases, the agent will seek compensation from the seller. This makes the agent’s service free to use and helpful to the consumer.
When using a tract builder, the buyer is restricted to using available lots. This causes frustration at times with buyers wanting to live in certain areas or have a certain amount of acreage. Some tract builders may offer to build on a person’s lot but hidden fees and costs can make that approach expensive.
Custom builders are usually not as rigid meaning the buyer needs only to find the lot they are interested in and the process can begin from there.
After deciding on an available lot or vacant lot for sale, financing begins. BuildingAdvidsor.com gives a great explanation on this process. They state:
“The two basic types of construction loans used by homeowners are one-time-close loans, and two-time-close loans. In all construction loans, money is disbursed by the lender based on a pre-established draw schedule, so much money upon completion of the foundation, so much upon completion of the rough frame, and so on. The goal is to only pay for what has been completed, minus retainage, typically 10% of the cost of the project, which is held back until everything is completed properly and the owner is issued a certificate of occupancy (CO).
During the construction phase, payments are interest-only and start out small as you only pay on funds that have been disbursed. When construction is complete, you pay a large balloon payment for the full amount owed. On some loans, no payments are due until the house is completed. Fees on construction loans are typically higher than on mortgages because the risks are greater and banks need to do more work managing the disbursement of funds as work progresses. The faster the work is completed, the less you will pay in interest.”
The buyer’s lender can better explain this process according to their new construction guidelines.
To summarize the building process the buyer needs to:
• Speak with a builder and architect.
• Find land to build on.
• Finance the entire purchase and pay interest only during the construction phase.
Contact me today to get setup with an expert builder and low cost lender for your best investment ever in real estate.
Lane is the best realtor I ever had. He answered all my questions as we looked at different houses, and if he didn’t know the answer to a question, then he asked the right person to get the answer for me. He actually went in the attic at one house to check the furnace for me. He looked for entry to a crawlspace of another house and noticed the downspout was blocked shut. He checked the cooling system in another house and we discovered it didn’t work. He saw things that I would have otherwise…
Lane Banner was referred to us by a close friend who had success in selling two properties through Lane . Having grown up in a family owned Real Estate company, I knew I wanted to work with someone who I could trust to provide market insight, properly market the property, and who had excellent communication throughout the selling process. Lane delivered on all these and so much more. Thanks to Lane we had a competitive offer withing 5 days of being on the market and closed before we had to pay o…
I would highly recommend Lane to any individual wanting to purchase a home! He was extremely diligent in helping us deal with the multiple problems that arose during the closing process. My husband and I are new home buyers and the overall process was overwhelming to us. Abnormally, we encountered problem after problem. Lane went above and beyond to make sure that we understood everything and got the deal we needed! His is undoubtedly knowledgeable in the field of real estate and investing. He i…
This is our first home buying experience. We have had some personal experiences with other people that have left us uneasy. After those experiences we find it hard to trust people. Lane has earned our trust with his honesty and willingness to help and be there for us whenever we need him. He has responded to all of our questions day or night. He as our agent has shown vast knowledge of the area and has answered all of questions and concerns we have honestly and promptly. If there may not be some…
He knew the area we were selling our home in well and had spot on advice in regards in how to sell it. He’s very honest and sincere something we had never come across in previous realtors. He was always quick to respond to questions. We plan to use him again in the future.
In purchasing our home we had a number of issues and one false start and Lane was there for us at every turn. This made dealing with some of these unforeseen issues much easier. He really went to bat for us in dealing with the sellers Realtor and got as much done as could be done. His demeanor very much put us at ease both in the selling of our home and the buying of our new home.
I am so, so thankful that my friend recommended Lane to me, when I asked if he knew a good Realtor. Lane was with me through every step of the journey to finding a perfect home. He’s professional, kind, and was always patient and encouraging when I had questions or concerns. And he was always prompt in responding to my calls and emails. I appreciated that immensely. He takes his work very seriously, and understands the importance of top notch service. He grew up here, so his knowledge of the W…
No agent could be more thoughtfull or helpful, he responds quickly to emails and works beyond 100 % / He treated Mom and I with respect and made us feel we was worthly of his time even though we had very liitle money to invest.
Lane Banner is truly a professional. He has a friendly personality, He doesn’t push you on anything but helps you with any questions you might have. He is very quick to get process going and you never have to wait on him. My experience with Lane was great all the way through the process. I highly recommend Lane Banner to anyone who is interested in looking at real estate.
Very personable and easy to work with. Mr. Banner was also very helpful in recommending contractors and service professionals to help me get the property in proper condition for showing.