Building your dream home is the most wonderful thing ever (next to your kids), but just like your kids, it takes careful planning and consideration. There are upfront tasks and considerations that may not have crossed your mind, especially if you’ve purchased an existing home before and feel like this isn’t your first rodeo.
Well, if this is your first time building a house, buckle up. We’re about to embark on a wild (but fun) trip!
1. Your budget
No brainer, right? Before embarking on a home design, drawing an office nook inside the master bedroom, or finding the best hands-free light switch, you need to determine how much you can spend. Also remember that since we’re dealing with a custom home, that money — whether out of pocket or through a construction loan (usually both) — will need to cover the entire construction process.
You also need to consider your long-term mortgage and your monthly budget for it once you finish building the house. To be clear, this must be taken into account before Construction begins…not until the custom home is built and you’re ready to move in.
Not sure where to start? APM is happy to explore suitable loan options that fit your budget and financial situation.
2. How to get a construction loan
A construction loan usually plays a major role in your journey to your custom home. Unless you’re paying cash, securing proper construction financing is a crucial early step. Although this may not be the most glamorous part of building your dream home, it is one of the most important decisions you will make before construction begins.
Construction loans are not one-size-fits-all. One of the first choices you’ll make is whether a one-time construction loan closing or a two-time closing is best for your goals, timeline, and comfort level with today’s market conditions.
A One-time construction loan Combines a construction loan and a permanent mortgage into one loan. You qualify once and get your permanent financing up front. This option offers simplicity and predictability, with fewer approvals and paperwork during the process. A potential drawback is that the permanent interest rate is set before construction begins, which may limit flexibility if rates fall during construction.
A Construction loan close twice It separates construction financing from the permanent mortgage. You qualify for a construction loan first, then apply for permanent financing once construction is complete. This option can provide greater flexibility, especially in a high interest rate environment, as it allows you to secure permanent financing later and potentially benefit from improved market conditions. However, it requires qualifying twice and involves two separate closings.
At American Pacific Mortgage, we offer one-time and two-time construction loan options. for you Your local APM Loan Consultant It will help you compare the pros and cons of each and guide you toward the structure that best supports your construction, budget, and long-term homeownership goals.
3. How to find the perfect construction site
This may seem obvious, but one of the first things to know before building a house is that you have to find a site. Consider location, neighborhood, and proximity to amenities. Dive into homeowners association (HOA) rules and costs. This initial decision sets the stage for the entire construction process.
Remember that not every empty lot is intended for housing. This is where a real estate agent can be really helpful. You don’t want to get your hopes up only to discover that a beachfront lot along Main Street isn’t an option for you. First world problems, right?
You’ll also need to consider whether your chosen plot of land can accommodate your design plans, which we’ll get to next.
4. How involved are you willing to be in the plans and specifications
Whether you choose a true custom home or home builders with pre-designed options, you’ll need detailed plans and specifications. Decisions about floor plans like where the master bedroom will be located, custom home features like how much built-in storage space, and design elements like which light fixtures will be used (and where light switches will be located) will all be up for discussion.
How involved you are in the process — and how committed you are to building the home of your dreams for a little less weight on a semi-custom home from a home builder — will help you decide which way to go.
Consider the time, energy and cost commitments that come with custom, semi-custom and pre-planned homes. When building a home, these three considerations will determine how you proceed.
5. How to choose home builders or subcontractors
Choosing the right home builders or subcontractors is a very important decision. For home builders, you’ll want to research their previous developments, perhaps tour their model homes, and get recommendations and references. For a custom home, you will need to find a reliable general contractor to manage the construction process and all the workers who will build the home according to your plans and specifications.
Oh, and no matter how great a custom home builder is, you’ll need to verify their standing with the Better Business Bureau (BBB) and the National Association of Home Builders before signing a contract. If you think building your dream home is expensive, you can’t imagine how those costs multiply exponentially if you build a custom home and then find out it’s not up to code. Or the roof is leaking. Or the retaining wall has already cracked.
Okay, that’s enough. You get the point. We can feel our blood pressure rising just thinking about it, but it brings us to the last thing you should know…
6. How to prepare for surprises and delays
Anyone who’s ever put a shovel in the dirt can tell you that building a house can often come with unexpected expenses, including construction delays that are also time-consuming. Expect the unexpected by acknowledging that there are costs, delays and other factors that can impact your timeline and closing.
When you build your dream home, you sort of become a general contractor yourself as you oversee the construction process. (Note: This is the case no Meaning you don’t need an actual general contractor; Let’s be real.) With this in mind, you should be prepared for the sudden bumps and approvals and required funds that often accompany them.
Now that you know the things you should know before building a house, you may want to ask yourself some questions. Questions like:
- What is my budget?
- What type of construction am I interested in (custom home, semi-custom home, or pre-planned home)?
- What home builders or general contractors will I use?
- What location or style of home am I looking for?
- What custom home features do I want?
- How much do I want to comment on this home design?
- What is my schedule?
More about custom home expenses
Custom home construction costs vary based on square footage, location, features and materials. According to Forbes, as of early 2024, the average cost of building a home in the United States will be approx $150 per square foot (without land), but this can reach a much higher level. In California, for example, custom homes start at around $400 per square foot.
You’ll need to break down costs into categories such as pre-construction work, ground and site work, foundations, framing, exterior work, major systems, and interior finishes to prevent these numbers from becoming too confusing or ambiguous.
Building a custom home is an exciting journey, and having the right guidance can make a big difference. APM Loan Consultants specialize in construction financing and work with homebuyers at every stage of the process, whether you’re just starting to explore options or you’re ready to hit the ground running.
To learn more, contact a local APM Loan Consultant And access our free resources, including Construction 101 book and Construction checklistdesigned to help you plan, budget and build with confidence.
