Steps To Building Your Dream Home

Assuming that you will need a loan to build your new home, it is important to first determine two things:

• The maximum loan amount you qualify for.
• The largest monthly payment you are comfortable with.

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 38-42% of your gross (pre-tax) monthly income. This percentage can vary depending upon your FICO score and amount of your equity in the project. The best way to sort this all out is by speaking with your local Pacific Modern Homes, Inc. (PMHI) dealer. They can refer you to the best lenders for your project. Keep in mind, to build a new home actually requires two loans, the construction loan and the long term loan (or conventional mortgage) that replaces the construction loan after the construction is completed. In many ways, the construction loan is the most important since it must be structured in such a way to conveniently pay the construction bills as your home progresses. Hence, the importance of using an experienced "new construction" lender that will also "bundle" the construction and long term loans. It is also important to consider the maximum loan payment you will be comfortable making. Many are happy with whatever amount their lender decides to loan them. Others have a certain amount of their budget they want to have left over each month for other priorities, such as travel or new furniture.

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.

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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 dealer 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.
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PMHI Pre-Engineered or PMHI Custom plans? Your local PMHI dealer can help you determine which home plan approach is best for you. You can choose from one of our 36 existing pre-engineered plans that meet or exceed current building codes. We can also modify one of our existing plans to meet your specific needs. PMHI can also produce a uniquely custom plan just for you or work with plans you may already have. While you are deciding which plan best meets your needs, be sure to consult with your PMHI representative about the construction costs associated with the different design features you would like have in your new home. Some features, like higher roof pitches or casement windows, can increase your building costs. You might prefer to use that money in other areas of your building project. It is important for you to choose a home plan that best fits your family's needs as well as your budget...and also fits your building site.

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-in-Place'? 'Aging-in-Place' is one of the terms used to describe one's desire to live in their home as long as they can. In order for this to happen, the home should be designed to transition with you through all of life's stages. To help make this happen PMHI has developed a home design approach we call the Transitional Home Environment (T.H.E.) T.H.E. Certified Home Plans are uniquely created to incorporate flexible Life-Style options, Home Automation Features and Accessible Design. T.H.E. Certified Home Plans provide a home environment that beautifully transitions through all stages of life. T.H.E. Certified Home Plans provide peace-of-mind for the future. If you would like to learn more about the Transitional Home Environment, contact your PMHI representative.
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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 dealer can help you with contractors 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.
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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 dealer will be happy to help you get the needed documents together.
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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 local PMHI dealer 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.
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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.
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