How much to build a particular plan?
A. Home building is not an exact science. Every builder and craftsman brings to the trade their own preferred way of building and estimating their work. A common question from potential new home owners is: "how much does a home cost per square foot?".
This is a reasonable question however, considering that many realtors sell homes by volume, and lending institutions appraise homes in part by applying a value per square foot. The reality is different style homes within the same square footage cannot be built for the same price. Home Builders that repeatedly build the same home at the same quality level will tell you that cost per square foot will vary on each home- depending on site conditions, current economics and amenities chosen.
New homes are not unlike automobiles in the sense that when you purchase a new car the price is not determined by the size of the car as much as the options, complexity to build and deliver.
What kinds of customizations are possible?
A. Basically, almost any customization is possible. We recommend weighing the cost of modifying a plan vs. that of creating a custom design. Modifications range from simple to complex and the design fees correspond to the complexity of the modification.
How long does it take to build a custom home?
A. Of course the answer depends on the size and complexity of the home and the finishes. A traditional 3,000 square foot story and a half home may, for example, take five to six months from site preparation to move-in.
What is a Construction Loan?
A. A temporary loan used to pay construction costs during the construction period. A construction loan is usually followed by a permanent mortgage. .
Can you explain how construction loan work?
A. Construction loans are story loans. That means that the lender has to know the story behind the planned construction before they're willing to loan you money. Because it's a story loan, it's not going to be standardized like mortgage loans underwritten to Freddie Mac or Fannie Mae guidelines. That said, there are some common features to a construction loan. Construction loans typically require interest-only payments during construction and become due upon completion. Completion for homeowners means that the house has its certificate of occupancy.
Construction loans are usually variable-rate loans priced at a spread to the prime rate or some other short-term interest rate. You, the contractor and the lender establish a draw schedule based on stages of construction, and interest is charged on the amount of money disbursed to date.
Another variable in construction loans is how much of the project cost the lender is willing to lend. If you already own the land, then that can be considered as equity on the construction loan.
Many homeowners use construction-to-permanent financing programs where the construction loan is converted to a mortgage loan after the certificate of occupancy is issued. The advantage is that you only have to have one application and one closing.
Depending on your view on interest rate trends, you could also purchase a rate-lock agreement valid through the expected completion of the construction.
A construction loan, unlike a mortgage, isn't meant to be around for a long time. If you're taking out a $200,000 construction loan for six months and you pay an extra 0.5 percent on the loan, it costs you an additional $250. (Assumes an average $100,000 loan balance over a six-month construction period.)
You may be willing to pay a higher rate on the construction loan if you're doing construction-to-permanent financing and can get better mortgage terms or a longer, better rate lock from that lender.