So you want to build a house instead of buying one that’s already constructed. This can be a great idea for many reasons! By building a house, you guarantee that your spending is controlled one hundred percent by you, as well as ensure that the house has everything that your family requires to go about their daily lives – whether that applies to wants (such as extra rooms, specialty rooms, extra outside space, or certain fixtures), or needs (such as handicap equipment or a certain bedroom count for a larger family). It can be extremely difficult to find a pre-existing home that checks all of your boxes and is exactly how you want it.
You take out a loan to build a house just like you would take out a loan to get a mortgage. However, the money is spent a little differently. The average cost to build a house from the ground up is a little over $290,000 but that can vary greatly. The lowest you will be able to build for is around $147,000 and the highest you can likely get approved for is around $436,000. These numbers depend on a lot of things – the home’s location, it’s size, how many rooms it has, the quality and newness of it’s appliances, and more. Thankfully, when you build a house, you are completely in control of all of these factors. Theoretically, there should be no surprises!
Here are the general steps towards building a house from scratch.
Figure Out What You Want
Before you even talk with a lender, you need to know what you want in your house. After all, the lender has no idea how much they need to lend you if they don’t know whether you want a one bedroom house or a five bedroom house. Consider things like build type, location, and size of your home. These are the three general “building block” concepts that will help your lender form an idea of what you’ll want loaned to you.
Another thing to consider is whether or not you want to buy into a housing development or not. In this case, the builders of your future home will have you choose from a limited number of floor plans, typically with a list of add-ons or upgrades to choose from. Going this route is more like building a house from a catalog than starting from scratch. If you don’t want to make every single decision for every square inch of your house, this is the way you will want to go. It does limit your options, but it is also quite cheap compared to building from scratch. You can save up to 15% on home building costs by going through a housing development!
Even cheaper than building your house through a housing development is go build what is called a “pre-fab” house. These homes are manufactured off site and then the pieces are assembled on location, which means that it’s also much speedier than building from scratch. These homes can be just as roomy and beautiful as homes that are built on site, but make sure you are getting better than builder grade product. “Builder Grade” means that the product (flooring, walls, windows, doors, and more) are just good enough to pass inspection or rules. Think particle board furniture – it does the job, but won’t last as long. Do your research on pre-fab companies to make sure you won’t get stuck with builder grade products!
Once you know what kind, size, and type of house you want, where you want it, and how you want to go about building it, you should…
Create Your Budget
Once you’ve outlined your needs and wants and how you’re going to get them, you should compare the estimated costs with what you’re willing to spend and make changes as needed. You will definitely need to do a lot of research and get estimates from a lot of building professionals. You don’t want to start something you can’t afford to finish here, so make sure you go above and beyond doing your due diligence to make sure you truly can afford to pay back a loan for the amount that you need. Talk to your loan professional to see how much you can get pre-approved for – this will help you cement numbers in your mind. Make sure no stone goes unturned when it comes to creating your budget.
Buy the Land
You’re building a house, so of course you need somewhere to PUT the house. It’s not uncommon for people to state that they were so focused on building the house that they didn’t think about the fact that they have to buy the land the house is going to sit on. When you’re scouting out the perfect location for your future home, make sure the location you choose makes sense for you and your family. Is it close enough to town? Are the neighbors far enough away for you to have as much privacy as you want? Do the other houses have good curb appeal? Is the lot big enough for your house with room left over for a yard? Are home values in the area similar to your projected home value? These are all extremely important questions to ask before you talk to your lender and get a loan to buy the land you’re going to build your house on. You want it to be perfect – no regrets!
Once you have bought the land your house will sit on, things have really started moving along. This is the point when you will…
If you chose to build a completely custom home where you make every structural and style decision from the ground up, you’re going to want to hire a general contractor to manage all of the subcontractors (the guys that do the foundation, the guys that do the frame of the house, the guys that lay the carpet, the painters, the door and window installation men, etc). The general contractor will also likely be willing to handle the legal aspects needed to complete the job properly. It’s likely that in this case you’ll also want to hire an architect, or at least have a consultation with one to look over your blueprints. Make sure that any professional you hire (down to the guy who installs your internet) is properly licensed and has great reviews or references. You don’t want to find out too late that the company who poured the foundation for your house did a horrible job, and now you have to backtrack to start completely over from day one.
At this point, you have your land, a group of hired professionals, and ideas. It’s time to really get started. Now, you can begin…
Did you decide to go the way of a pre-fab home or a housing development home? If so, this will be a little easier. If you plan to build a custom home, however, you definitely need to hire an architect to ensure that your vision is structurally sound. Will the water pipes run in such a way that you can position your bathrooms and kitchens throughout the house like you want? Where are “support” walls needed and how will it affect your vision? Is your second story properly supported?
Once these questions are all answered and any issues are resolved, you can…
Get Your Paperwork Ready
Did you hire a general contractor? If so, you’ll be glad you did right around now. To get your house built, you’re going to need a ton of permits at your city, state, county, and federal level. There are a lot of rules when it comes to building a structure of any kind so this is normal. Your general contractor is trained to take care of all of this on your behalf, as well as any inspections that have to be performed so that the permits can be made out for you.
After this, you will want to…
Your general contractor and your subcontractors (should) have insurance of their own, but you should purchase your own insurance to protect yourself financially, as well. You never know when something will go wrong. You can speak with your general contractor about this – they will be able to advise you where to look for good insurance.
And finally… After so long:
Your vacant plot of land is ready to be turned into a home with a yard. This part of the process could take three months or longer than six months – it depends on the finer details of your house as well as the weather. When it’s done, an inspector will take one last look at the finished home to ensure that it was built according to the plan you made at the beginning of the process – and that the home is structurally suitable for someone to live in. Congratulations – you built a house!