With so many new homes on the market right now, it’s easy to bet that you’ll get more house for your money by buying a finished home than proposed construction. Builders with finished houses are paying interest and carrying costs that they’d love to be rid of, and unlike a year or two ago, you don’t have to wait a year to move in! But I still hear people thinking about building a custom home, often on land they’ve picked out for themselves. So it’s good to consider the factors that are involved in building a house.
You’ll need to find your lot to build on – remembering the rule of thumb that the land cost should not make up more than about ¼ of the completed house value. And you’ll need to start sketching out a schedule for your project, understanding how the various aspects impact each other.
Think through your own plans, as well as the constraints and needs that may be driven by other parties in your enterprise. When will the seller want you to close on the lot? When do you want to build? Do you own a home that you plan to sell? Have you worked out building plans and specifications? Do you have a cost estimate? Have you selected a contractor? How soon can the builder build, and how long will the project take?
Bring your answers to these questions to your mortgage originator early in your process; it’s our job to help you create a strategy to finance your project.
