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This page last updated on 31 May 2013; Copyright ©; All rights
reserved by Pacific Modern Homes, Inc. (PMHI)
1. Get financially pre-qualified
Assuming that you will need a loan to build your new home, it is important to first determine two things:
1. The maximum loan amount for which you can qualify?
2. The largest monthly loan payment with which you will be comfortable?
The answers to these two questions will determine your maximum construction budget.
In order to determine the maximum loan amount you qualify for, a potential lender
considers your credit score, income and debt. Credit scores are referred to as your
FICO Score. FICO Scores range between 300 and 850. Higher is better. Your FICO score
is determined by your payment history, amount owed, length of credit history, new
credit, and types of credit used. Generally speaking, lenders want your credit score
to be 660 or higher to be considered for a loan. Lending requirements vary among
lenders. The Federal Government has a free publication, “Your Credit Score”. In it
you will learn why your credit score matters, what good and bad scores are, the elements
of your FICO credit score, and how to raise your score. With regard to income and
debt, most lenders do not want your total monthly debt (including your house payment)
to exceed 38-
Another aspect of the construction lending process is to determine the anticipated value of the completed project. This is an important part of the construction lending process because, in general, the lender will loan about 80% of the appraised value of the completed project, including the land costs. For construction lending purposes, the Appraiser uses the building plans to arrive at the anticipated value. As you can imagine, one could have spent thousands of dollars to get to this point and it would be nice to have an idea of the anticipated value before spending any money. We suggest one consult either a Real Estate Agent or www.zillow.com to determine anticipated value before spending any money. This is not the same as an appraisal, but it’s useful in evaluating the overall project. Note: This is of particular importance if the home values in the area you’re considering have dropped in recent years.
Get pre-qualified by our recommended lender .
2. Decide where you want to build
When planning where you want to build your new home it is important to consider the following:
• State, County and City Building Fees.
• Distance from your work, schools and social activities.
• Slope of land, if any (construction costs on sloping land are higher).
• Any Covenants, Conditions and Restrictions (CC&R’s) that apply to the property. Many CC&R’s have home size and style requirements along with home owner association dues. Some also have use restrictions.
• Utility costs including public connection fees or cost estimates to install a private water well and/or septic system.
• Build ability of the lot. Some lots have additional requirements to build on because of environmental issues, grading requirements, soil bearing requirements, and long driveways or other access problems.
If you already own your lot, your local PMHI representative can help you resolve the cost issues related to the above considerations. If you are working with a local Realtor to find your new home building site, make sure that you make any offers to purchase the property, “Subject to”, the above considerations for at least 30 days. That way you will have the opportunity to evaluate the development costs before you actually purchase the property. Again, your PMHI representative can help you with the construction cost items by giving you a Construction Cost Estimate using a proprietary PMHI estimating program.
3. Choose your home plan
PMHI Pre-
Another point you should consider when choosing a plan is its appraisal value when completed. Generally speaking, it is wise to build a home that is similar in size and quality to the other homes in the immediate neighbour hood. If the home you’re building is a lot larger or smaller than surrounding homes it could have an adverse effect on your appraised value. The value of the other homes in the area will have a direct effect on your appraisal since they are used to identify the value of your new home. For more information about appraisals you can contact your local PMHI representative, a local appraiser or www.zillow.com.
Are you planning on “Aging-
4. Generate your construction budget and request an appraisal
At this point, you must
decide if you want to be an “Owner/Builder”, that is, to act as your own General
Contractor, or hire a General Contractor to run the job for you. The most economical
way to build a new home is to do all the work yourself. However, most people do not
have the time or all the required skills. If you decide to act as an Owner/Builder,
simply managing the job by hiring all the necessary subcontractors you can still
realize savings of approximately 20% or more. If you hire a General Contractor, you
will also be paying the General Contractor to manage the job for you.
When your home plans are completed, you will be ready to generate your construction budget and obtain labor and material quotes for those items that you do not plan to do yourself. The format for your construction budget (called the Job Cost Breakdown) will be given to you by the lender. The lender will also give you the necessary paperwork to complete for the Appraisal request. All this information can be intimidating to you. Again, your local PMHI representative can help you with contractor referrals and material suppliers who can give you the labor and material costs for their part of the Job Cost Breakdown. For the portion of your project that will be supplied by PMHI (the shell or framing package), you will receive a written quote and specification based on your home plans and engineering. Your PMHI representative will also help you in properly completing the Job Cost Breakdown so you will be ready to submit it to the lender for approval.
5. Submit your plans to the building department
Submitting your completed plans to
the building department is the last step to be done before starting the actual building
process. The permit process can vary from one day to months, depending upon the state,
county or city in which you are building. On average, most building department take
about six to eight weeks to complete their process. A major advantage of using a
plan designed and engineered by PMHI is that we guarantee that the plans and engineering
will pass all of your local building department’s requirements (except site specific
issues such as your site plan, energy calculations, etc.).
To make this process go as smoothly as possible, you will want to get the list of required documents needed in order to get a permit from your local building department. If you follow the list, it will make the permit process much easier to work through and possibly go a little faster. Your local PMHI representative will be happy to help you get the needed documents together.
6. Build your home
After you have received your building permit you can get started building your new
home. Depending upon the complexity of your project, the building of your new home
can take anywhere from 3 – 12 months on average. If you are an Owner/Builder, you’re
the boss. You are acting as the General Contractor. As such, you are responsible
for the success of your project. Owner/Builders hire licensed contractors to do whatever
work they have chosen not to do themselves. Most Owner/Builders choose to work with
contractors referrals from their local PMHI representative. However, Owner/Builders
are not required to work exclusively with contractors from the PMHI representative’s
contractor referral list if they have someone else they would prefer to use. During
the building process is when Owner/Builders find the help of their PMHI representative
to be the most valuable. Your local PMHI representative is always available to help
with questions along the way. During the construction phases you should take pictures
showing the progress of the building project. This is done for two reasons. First,
it is a way to remember the details of the construction process and to show your
family and friends. Second, you have a record of where the utilities are located
in the structure. This can be especially helpful if you want to make sure not to
put a nail into any plumbing, gas lines or electrical cables behind the sheet rock
when hanging a picture on the wall.
7. Move in
Move-in day is the reward you’ve worked so hard to achieve. It’s the time
you get to realize your dreams of living in your new home….a home that you had a
major part in the actual planning and construction. Depending upon the amount of
work you actually did as an Owner/Builder, you may have 20% to 40% equity in your
new home the day you move in. (Amount of actual equity varies from project to project
and cannot be guaranteed.)
After moving in it is a good time to organize and save your plans and all construction documents for possible future reference. Make sure you also save a complete list of your subcontractors and their contact information. Organize and save all warranty information for the materials used in your new home, including all new appliances. The pictures you took during the construction phase should also be organized and saved with these documents. Bottom line, it is much easier to organize this information when it’s fresh in your mind. Then it will be ready and available if needed in the future. In conclusion, building your dream home is one of the most rewarding experiences you can ever have. With over 40 years of experience helping others build their new homes, all of us at PMHI know we can help you succeed, too. Give us a call…..and let us help you get started.
The Steps to
Building Your Dream Home
