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:

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, our preferred construction lender considers your credit score, income and debt. 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.

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 about70 - 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.

After your initial consultation, we will have our preferred lender follow up with you with financing options.

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 are purchasing a 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. We can help you with the construction cost items by giving you a Construction Cost Estimate using a proprietary PMHI estimating program.

Pre engineered plans or custom plans? Ludwick Construction 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 the pre-engineered plans to meet your specific needs. We 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, we will consult with you 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 neighborhood. 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.

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, just let us know and we can discuss the details.

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, we 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. We will also help you in properly completing the Job Cost Breakdown so you will be ready to submit it to the lender for approval.

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. We will be happy to help you get the needed documents together.

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 our contractor referrals However, Owner Builders are not required to work exclusively with contractors from our contractor referral list if they have someone else they would prefer to use. During the building process is when Owner Builders find our help to be the most valuable. 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.

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 16 years of experience helping others build their new homes, Ludwick Construction can help you succeed, too. Give us a call…..and let us get started!