How To Build Your Dream Home
How to start building your dream home
This is probably the most frequently asked question I get in my Instagram DM’s, this, and where to start building your home. There are many different paths you can take, and it can get complicated. I’ll break it all down here for you, and share a printable PDF to help you decide your best path forward . You may also be interested in this post that gets into all the details around the costs to build.
Ballpark Your Costs
Everyone's least favorite part, but it’s so important you have the information you need upfront to understand if building is a good financial decision for your family. The very first thing you should do when considering building is to take a look at the recently sold lots, as well as recently sold new builds in your target area. This will give you the best understanding of what land is going for if you are planning to purchase your lot before the build. I’ll also give you an understanding of what new builds are going for, make sure to pay attention to the price per sq foot. The new build sales will also give a sense of the finishes and craftsmanship across specific builders, which you’ll need down the road.
Pro tip: If you don’t yet have a realtor, take a note of who is doing the land sales, depending on your area, there may not be many realtors with land sales experience. You’ll need someone experienced and confident in the many complexities of land sales, it’s so important you have someone that advocates appropriately for you.
If you’re planning on purchasing your lot first, you’ll also need to figure out the estimated costs to build and factor that into your land estimate. You won’t be able to get a precise number until you have a floor plan and quotes, but you do need a ballpark idea at this point to decide if building is feasible for your family.
When we were calling around to local banks to learn about their construction loan products, we also asked the loan officers what they see for cost per square foot on new builds, we found it helpful to get the range from the experts who see it day in and day out in our area. You can take use those sq ft estimates to play around with your house plan options, don’t forget to deduct the estimated cost of land if you’re buying the land separately. This will get your arms around the building costs so you can be educated as you start this journey.
The range we heard in our area was $150/sqft was the very low end for a less desirable area, and builder grade finishes, up to $500/sqft at the very high end for premium location, and all custom finishes. We knew we wanted to go somewhat custom, and have some premium finishes, so we could sort of estimate where on that range we would fall.
You can also refer back to the recent sales numbers on new build homes to see where they fell in that range, this is to make sure the info you are getting is syncing up, and to help you to better understand where you might expect to be from a cost per square footage perspective.
Family Priorities in the design & Floorplan
The first thing you need to figure out is what your priorities are for the home. This should be the small handful of wishes that are non negotiable. Things like a neighborhood with sidewalks, or a specific feature of the home. For us we wanted a large lot with acreage and a very open floor plan with dining, kitchen and great room all in the same space (link to our floorplan here). This could be anything, a covered porch, a gorgeous master suite, whatever it is.
Knowing what you want should help guide you to figure out your build options. For example, we wanted loads of land, so working with a builder/developer who offers .5 acre lots on cul-de-sacs wasn’t the route for us.
The financing path you will take depends on the type of build you do. If you are buying the land first yourself, you’ll either need cash on hand, or a construction mortgage that releases funds to the builder at certain checkpoints, then flips to a conventional mortgage once the house is complete. Some banks can do this in one closing, others do it in two.
Keep in mind more each closing costs $, we were able to find a local bank with a construction to conventional option with one closing. You'll also have to be prepared to interact often with the bank around fund releases if you go the construction product route. We found the more proactive we were with the bank the smoother it was.
If you work with a builder who owns the land, and is building the house to your specifications, you typically aren't responsible for any finances aside from a downpayment until the build is complete. Once the build is done you would take out a mortgage as if you were buying an existing home.
We bid on many lots over a couple years, and were outbid by developers every single time. Developers had deeper pockets, were able to offer cash, and offer more than we were positioned to do as they planned to develop the land into multiple houses to make a return. We were just a couple of kids with a note from the bank, we didn’t stand a chance in our market to get the acreage we dreamed about. We had to get creative, so we switch our tactics up, we spoke with the bank and worked it out that the cash we were going to use for the down payment would be used as cash for the land, and the bank would use the value of our land as the equity for our downpayment.
When our lot came on the market the seller had all the appropriate order of conditions from the town already defined, I drove by after work, in the dark, and I could knew it was perfect! Hub's was out of town, but we were able to put an all cash offer in that night. Our lot is just under 12 acres, and is set up to have enough street frontage comfortably for a single home, with most of the acreage in the back. Perfect for us, and useless to a developer, so we were only up against owners/builders like us. There were multiple offers at asking price, but since cash is king, we got the lot!
Do you want to pick out all the things, or just a few?
The next thing you need to figure out are all the finishes, this includes all the design elements. Do you want to pick out every single paint color, cabinet design, tile, grout, bathroom fixtures, plumbing fixtures, doors, windows, siding, shingles, and a million other things? Some people love to do these things, others not so much. Either way is fine, you just need to know where you fall and what your limits are.
For example, when my parents built, their builder had done hundreds of homes and had a standard granite, kitchen cabinets, trim, windows, etc. already picked out. They were able to take his design plan and use that as a baseline to customize from.
We really enjoyed picking out every last detail of our home, and were were in the pre child life stage where we could visit stores on the reg and thoughtfully plan out the design of each room.
The point is, don’t torture yourself if picking everything out is going to make you overwhelmed, lean on your builder or a designer. And if you have that fire to design, make sure you set your build up to be able to add your design choices in, if your builder has a set plan.
There are so many ways to get and design your floor plan. Jake and I went through Architectural Designs and found a few we loved and settled on ours, with a few minor adjustments
For others, working with a designer on a completely custom design is the best route. And for others, working with a builder who has a handful of designs he or she knows well can also be a great choice.
If a builder has built your plan before, you can be confident that there shouldn’t be surprises, and that they can work at a nice clip.
With custom designs or self bought designs, they are going to be somewhat unique, and could pose unforeseen challenges as it’s the first time your contractors are working on this plan. Some things just don't make sense once you start building. For example, we bumped up the basement ceiling to be 9", which resulted in needed additional steps in the mudroom to the garage, which resulted in the steps having to be moved around from the original placement.
Let’s get the financials out of the way
Financials are going to follow one of two paths if you are planning to borrow from a bank.
You’ll either contrat with a builder who already owns the land and will sell the home to you when it is completed. Or, you will own the land and contract with a General Contractor or work with your own subs to complete the work. These two options may sound similar but they have a huge impact on how the financials will work.
The banks will ask for much more money down than if you were purchasing a ready built home as there is risk to them in the building process. We ended up putting about 30% down, AND they wanted to see an additional hefty chunk in liquidity to cover overages. In our experience, the bank was really upfront about the down payment amount, but we were completely blindsided when they asked for an additional 10% of the home cost in liquidity, in our bank account to cover potential overages.
I'll leave you with a few tips here & the downloadable PDF workbook!
Please let me know what you think, and follow us over on Instagram to see loads of pics, we also have a build hilight pinned to the bio!
General tips to ensure a smooth build
-Make sure your contractor is aligned to your preferences
-Visit often, ask questions, be nice
-Share your ideas with inspiration photos, not just words
-Keep in contact with the bank, ask them what they need next as to avoid a last minute emergency
-Pick out your designs as far out as you can, I had all my paint colors decided before the build even started
-It always costs more money then what you think, accept it and enjoy the piece of mind that this will be your perfect forever home