Understanding the building process

Published on Jul 01, 2021

Understanding the building process

Congratulations!  You’ve made the exciting decision to build your new home. Now, where do you start? The home building process doesn’t have to be intimidating.

Here’s a basic walk through of the steps needed to design and build a custom home.  

  • Select a floor plan – You can find stock plans for free online, or you can hire an architect to design a custom plan just for you. While a custom plan will be more expensive up front, it may be worth it if you have unique design ideas. Make sure to have an engineer and your local building department check for code compliance. If you hire an architect or home designer, they will typically take care of this for you.
  • Hire a builder – The builder will act as general contractor and will be responsible for pricing, executing the project, and managing sub-contractors.  Make sure to pick a reputable builder who has experience with the type of home that you want (size, location, materials).  Ask around for references, look at the signs in front of homes, or check with the county assessor’s office to see who built that home you keep eyeing down the street.  Once you have your list of candidates, get competing bids from each.  Be sure to talk to past clients and visit currently active sites to get a real sense of what each would be like to work with.
  • Construction contract – The construction contract is an agreement between you and your builder about the price and scope of your building project.  Make sure to include as many details as possible.  Materials, brands, fixtures, and substitution options should all be specified to avoid any issues down the road.  Some builders will include allowances for optional upgrades. These are usually flooring materials, cabinets, countertops, bathroom fixtures and kitchen appliances.  If your contract includes allowances, make sure they are realistic. You may want to make your selections and price them out before signing so that you don’t go over budget. And lastly, since these contracts are typically drafted by the builder, you should have it reviewed by a qualified attorney.
  • Get a construction loan – A construction loan is a short-term loan used to cover construction costs as they occur. The loan is paid out in installments, or drafts, as each portion of your home is completed. Your lender will need a blueprint and a comprehensive list of specifications from the builder to appraise the potential value of the home. This will determine how much they are willing to lend. 
  • Construction – This process takes from 6-12 months depending on the location, climate and complexity of your home. It is understandable that you will want to monitor the progress and builders typically encourage you to be involved. Arrange ahead of time to be present at any inspections. This gives you a chance to monitor the progress and understand what’s going on behind the scenes. You are welcome to visit at other times too, but make sure to call ahead to minimize construction hazards.  At the end of the process your builder will arrange a final walkthrough.  Take your time to look everything over and be open about any concerns or outstanding issues. You are excited to move into your new home, but it will be worth the wait to make sure you are getting exactly what you paid for. 
  • Final loan – Once the dust has settled and your dream house has been completed, you will work with your lender to obtain a traditional mortgage that pays off the construction loan. The home will be reappraised, so it is important to pay attention during the building process to make sure the finished product is as close to the proposal as possible, or you could be stuck footing the bill for any overages.