As many of you know we are one of the many taking advantage of the $8000 tax credit for first-time home buyers this year. We are currently in the process of building our first house and are pretty excited! We just finished our pre-construction meeting and so I thought I would write a little bit about the process of building a house that we have gone through the last few months. Obviously since we haven’t finished the process this article is kind of like a work-in-progress – so as always feel free to share your tips, suggestions, ideas in the comments below…
Also, just to clarify, we are building in a subdivision with a large builder, so I am sure this process is different than if you were using a smaller builder or building on your own plot of land. Even still, I am sure each builder does things a little bit differently, but these are the steps that we have taken thus far….
1. Negotiated with the builder
After we found the model of the house and subdivision that we wanted to live in we began negotiating price with the builder. From what I hear the biggest markups are on the options, so that also is where there is more room for bargaining. After we agreed on the price, we signed the contract and put down $500.
The major lesson I learned is that everything needs to be negotiated at this point. We have gone back and tried to get the builder to do things for us and to negotiate a price of an upgrade. At this point we are pretty committed and they know that. They were a lot more flexible on the offset when they knew that there was a greater likelihood that we would walk away.
2. Applied for mortgage loan
The next step for us was to get loan commitment from the lender. I am not sure if all builder’s require this, but ours did. Basically they were looking for the lender to commit to providing a loan for us (contingent on the house being completed, inspected, etc.).
Being newly self-employed, I was expecting this to be a little more difficult than it was. After contacting two lenders I was able to secure loan commitment. I know we aren’t completely out of the woods until we have the keys in hand, but it was nice to get the commitment from the lender.
3. Picked everything out
This was the fun part. We got to look at all the flooring, cabinet, counter, siding, etc options available and start picking and choosing. Initially it was overwhelming, I had no idea how many different options we would have to choose from. One of the things that (I think) we did well was modeling our selections off of something we already liked. Rather than guessing with the 2″ samples what the cabinets and counters will look like together, we found examples (in magazines and showrooms) that we liked and tried to duplicate the color combos.
4. The Pre-Construction meeting
This was the meeting to get the ball rolling. We confirmed all of the color selections we had made as well as any adjustments made to the blueprints. We met with the foreman and discussed all the details of the lot layout, etc. This was also the point where the builder wanted a little financial commitment from us – we had to provide $3500 to get the construction started.
Where we are now
So this is where we are now. They should be breaking ground in the next couple weeks. And per many of the comments on the 1st-time home buyer tips article we will be keeping an eye on the building process to make sure everything goes as it should.
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This post reminds me of a couple of years ago when my wife and I were building our current home in a big subdivision with a big builder – just like you. Building our home was fun, yet a stressful process.
My tips? When you’re going through the process make sure that you clarify everything about the build with your builder and foreman, and then follow up consistently throughout the process. If you don’t follow up with them and stay on top of them during the build things won’t get done – or won’t get done correctly.
I remember countless incidents of outlets being in the wrong spot, light switches being placed incorrectly, etc. My neighbor who built his house next door had their in ceiling speakers that they had paid for – not installed at all!
Oh, and if you find something wrong – bring it up – right away! Get the phone number for the foreman of your build, and don’t be afraid to call him!
BMM,
I have been hearing that advice over and over again from just about everyone I ask who has built… I will definitely keep it in mind…
First off….congrats!!!
I will also be taking advantage of the 1st Time Homebuyer’s Credit, but I am not going to have my first home built…I’m going to save that for later down the line!
Thanks for sharing, because one day I will have a house built and this type of information will be useful!
Lakita
Bob, from a former mortgage guy, look at your mortgage commitment, and make sure it’s a commitment, and not a prequalication letter, or a “preapproval” subject to everything. Not saying this is you, but a lot of people think just about any letter from a bank that doesn’t have DENIED written on is a commitment chiseled in stone, which is often not the case.
To echo BMM, inspect, inspect, inspect, and don’t close if you aren’t happy.
Also, since you’re buying new construction, the re taxes will be assessed on the land only so your escrow will be low at the closing table. Be prepared for that to be corrected about a year or so later. A little extra in the emergency fund is never a bad idea.
Bob,
Dude, you have to do this AS SOON as the framing is up. Buy a large roll of speaker wire. Sneak into the job site after everyone has left and run the wire all over the freaking house. Anywhere you could possibly imagine having speakers. Definitely in the upper corners of any room having a TV or Stereo. If you don’t use it, fine, but it will be a Life saver when you go for that banging surround sound.
Being computer savy, you could also run some ethernet lines around the house, so you can come back and install a nice computer network connected throughout the whole house. That way you never have to pay extra for wireless, and you don’t have to worry about the security hassles of wireless.
If you still have a landline telephone, you can do the same.
Congrats, I hope everything goes well .
Kevin,
yea, we first were pre-qualified and I was amazed at how little they actually knew about our situation when they gave us that approval. The commitment letter that we got from them really is a commitment contingent only on the “house stuff” and not on us as borrowers – the builder was actually very specific about this as they didn’t want to get started building without knowing for sure that we would be able to get financing…
Very wise and practical tips!
Congrats. I built from the ground up as well and have been in my home for a year now. First, be careful if you take the advice of the gentleman that suggested adding wire. I wanted to do that, but doing anything during the building process that is not by the builder may void your 1 year warranty. I also agree to pay attention to the little things, but also the big things…they almost put a wall where a wall wasn’t supposed to go, they left the ceiling fan brackets out of two of the bed rooms and some other stuff. Just keep a close eye and follow up, follow up, follow up with everyone. The process can be slow if you don’t. Visit the site while the workers are there so they have a face with the house.
Building a home the way you want it is a wonderful thing. I love my house (not real happy with my builder), but really love my house because it really is what I wanted.
Prayers of blessings for your family, for the builder and mortgage lendor.
Would it be possible to create this article as a PDF download from your website?
@Carol
not from the site itself, but if you copy and paste it into Google Docs you can convert those documents into PDFs. Please see the article reprinting policy for more detail… Thanks!