Contrary to the belief that securing financing is simply about credit scores and income levels, it’s certainly not. With somewhat tougher lending and credit guidelines, it’s now even more important to find a lender who is honest, forthright and will work in your best interest.

Fortunately, with the dropping interest rates, there may never be a better time to secure financing, despite tougher regulations.

When building there is most often times the need for a construction loan while the home is built. After the home is finished, you must pay off the construction loan and refinance the loan into a conventional mortgage loan.

Construction loans are often easiest to secure through a local credit union or a local bank. Local bankers are much more comfortable offering home constructions loans in their area because they understand the local market. However, borrowers of construction loans may have to provide more information to prove they can afford the project. You often can’t apply for a construction loan until you provide building plans, a construction contract and an estimated cost.

See our best advice below for how to find the right lender for you, no matter what type of home loan you need!

Shop around: It can’t be emphasized enough that you should shop around when it comes to finding a lender. Compare rates and terms of mortgages until you find the best deal, and don’t forget to factor in hidden expenses such as closing costs.

Credit unions: Check out your local credit union. As mentioned, they are more apt to work with borrowers in their communities. Credit unions are typically known to offer lower mortgage interest rates and low to no fees. They also offer personalized service and may be able to close on your loan quicker.

Mortgage brokers: Consider a mortgage broker. They act as a middleman and shop around for the best rates with different lenders. A broker’s goal is to match you with the loan product that best meets your needs and is the lowest price. A mortgage broker should be motivated and be willing to put in the hard work necessary to get you the best loan possible, while also working with the appraiser, title company and insurance company to make sure the process goes smoothly. Mortgage brokers may or may not be state regulated. Check with the National Association of Mortgage Brokers or the Better Business Bureau to find out if a broker is in good professional standing. When working with a broker, understand the loan process and typical fees, and ask questions if you don’t understand. After your loan is approved, you will work directly with the mortgage service provider.

Word of mouth: With so many options out there, it can be difficult to sort out who may be the best to work with. Word of mouth is the oldest form of advertising, and usually the best. Talk to your friends and family about what lenders they used when they purchased their home. Ask them what they did or did not like about their particular lender during the process.

Be careful online: There are plenty of deals online, but not all deals come through a reliable broker or lender. Know who you are dealing with.

Additional Tip! Lock it in: A low mortgage rate is just a quote until it’s locked in. Mortgage rates can change as often as several times daily. If you want to guarantee you’ll get the rate you’re quoted, ask your lender or broker to lock it in.

Next Steps:

• Keep up with J. Thompson Builders on Facebook and Twitter.
• Learn more about J. Thompson Builders, J. Thompson Restoration, J.T. Unique, Asset Inventory Protection and visit our Custom Home Gallery.

Photo Credit, StockMonkeys.com

1. Do not buy land that has little to no resale value. If you’re buying a few acres of land to build a house on you want to consider things like the school district, and how far away it is from major cities, stores and restaurants. The further you go out into the country, the cheaper land becomes, but the harder it also becomes to sell.
2. Shop for the community when you shop for land. The place you want to ultimately choose to live is also the place you want your kids to grow up, where you want to spend your time and it should also be a community you want to support and help prosper.
3. Consider the expenses you could incur when buying an empty lot. In some cases you may have to pay to run electricity, phone lines and water to the home. Dependent on how rural the land is, you may also have to drill a well or install a septic system. Purchasing a plot of land which already has utilities installed will save you money.
4. Check with the area’s local government about any zoning ordinances. Some laws may not permit you to build on the land, or they may restrict you from building the home you want. Subdivisions may have additional restrictions on the type of home you can build on a lot. As well, you will want to understand the county’s long-term plans for the surrounding land so you’ll know if major roads, busy intersections or interstates, or commercial areas are going to intrude on your quiet property. Understand other subdivision restrictions. Besides zoning laws within a subdivision, the land plots often come with other restrictions. The subdivision’s homeowner’s association may charge membership fees, and have rules for how often you mow, where you can park your vehicles or how you deal with waste removal.
5. In addition to a land survey, have a floodplain survey conducted. While it will cost you more to conduct a survey, being in a flood zone and not knowing you are located in an area prone to flooding will cost you more in the long run. Flood zones have letter designations. Zone A is a 1% chance of yearly flooding, and flood insurance is required if you build on land with this designation. Zones X and C are the best ratings as those areas are estimated to incur less than a .2% chance of yearly flooding.
6. Consider topography (the shape and elevation) of the land when selecting a lot. If the land has uneven ground you will incur the extra cost of grading it.

Next Steps:

• Keep up with J. Thompson Builders on Facebook and Twitter.
• Learn more about J. Thompson Builders, J. Thompson Restoration, J.T. Unique, Asset Inventory Protection and visit our Custom Home Gallery.

Photo Credit, dmertl

Construction permits, or what may also be called building permits, are required by most cities whenever new construction occurs. A permit is also required for renovations, and various other changes to a home. Essentially, a permit must be secured, most times, whenever a building is constructed, altered, repaired, converted or demolished. The purpose of a permit is to protect the safety and well being of occupants and the community; a permit is meant to ensure construction work is accomplished in a way that protects occupants and others. The different permit types include structural, electrical, plumbing and mechanical.

Building plans are submitted at the time a permit is applied for. The plans must be detailed, and show how your project will meet applicable building codes. Each state will vary in their specifications, but many will require that the plans be prepared and signed by an architect or engineer licensed by the state where you live.

Building codes are the set of standards by which a permit approval is based on. The codes ensure the structural safety of buildings. Most cities adopt established codes provided by such models as the International Building Code, National Electric Code, International Mechanical Code, Uniform Plumbing Code and the ANSI A117.1 for Accessibility. As well there are federal, state and local laws which govern construction.

Obtaining a construction permit occurs before you start building. The first place to look is the city website of the town in which you plan to build. Most city websites have forms you can download, as well as specific information about how to obtain a permit, and an explanation of local building codes. Your city will likely have a department which deals primarily with permitting, and you will work with them directly.

Inspections occur throughout the construction process, at certain points in the project, depending on the specific work performed. It is the responsibility of the homeowner or the contractor to ensure all required inspections occur. The project is not complete until it passes the final inspection.

Build to the plan, or submit any changes to the plan to the city, to ensure the plans meet the city’s approval.

Warning! If you do not obtain a permit,  you are violating city codes and will be subject to fines and penalties. Even if you do obtain a permit, it can expire after a certain time if no inspections are made during that time period. If a permit expires before the final inspection, the home violates city codes, and you’ll need to talk to the city department about re-applying for a permit.

Next Steps:

• Keep up with J. Thompson Builders on Facebook and Twitter.
• Learn more about J. Thompson Builders, J. Thompson Restoration, J.T. Unique, Asset Inventory Protection and visit our Custom Home Gallery.

Photo Credit, Daquella manera

Building a custom home requires a large investment of not only money, but also your time and energy. It’s a team effort, with hundreds of different people involved and often those people have different viewpoints and investments in the project. Thorough preparation, planning and coordination is essential to the success of the home building process. While building a new home can be stressful and it won’t always go as planned, it can also be a very rewarding experience, particularly the end result – YOUR new, beautiful, custom home. Here’s what is important to know before building a new home.

1. Understand building codes and other restrictions. Local laws regulate the construction of residential properties, and their restrictions can affect your building plan and result in the costs of building to increase. The development where you build may also have its own set of restrictions, often called covenants. Before purchasing property, meet with a city building department official to discuss any codes or restrictions, as well as to receive an explanation of the area’s development plans.
2. Know the final cost and how to stay on budget. Work with your builder to calculate a realistic estimate, which incorporates all construction costs, plus all the features you would like in your home. After looking at the estimate, you may want to eliminate some of the higher-priced features, such as commercial-grade appliances, to keep the budget reasonable. Factor in an additional 10-20% on top of the total expected cost to account for unexpected expenses. For more about staying on budget, read Home Building: Staying on Budget.
3. Know your funding availability. Unless you are paying cash, you may have to secure financing for both a construction loan and a mortgage loan. The construction loan is used to pay the builder, subcontractors and suppliers. The mortgage loan is used to finance the home after construction is finished, and is used to pay off the construction loan. Local lenders are sometimes the best source of funding for construction loans as they have an interest in investing in the community. Shop around, and choose the lender with the best offer who is the most likely to approve your application.
4. Consider resale. The house you build may not be the house you own forever, even if you plan for it to be. With that in mind, you should consider the home’s potential resale value. Refrain from adding so many upgrades that your home becomes overpriced for the neighborhood in which it sits. Also, be cautious of choosing a style which either doesn’t appeal to others or does not align well with the neighborhood. Bottomline: Don’t stick out! Read more tips about choosing a house plan design in Home Plan Design: Don’t Stick Out From the Crowd.
5. Understand project scheduling. While the goal is to build the house in the quickest time possible, with as little money invested as possible, construction is not a smooth process. Things can and WILL go wrong, and upset the schedule. Each project varies in its process and other variables, including the weather, affect the timeline. For more about project scheduling, read Project Scheduling: What Every Client Should Know.
6. Know the reputation of your builder. Lots of builders are on the market, actively vying for your business. But do a hefty amount of research to find out which builders have the best reputation. Ask family and friends for recommendations, but also interview past clients of the builders you consider using, and use resources like the National Association of Home Builders‘ (NAHB) member list.
7. Finally, DO NOT be passive. Be an active participant in the process. Many decisions are made by you. Have an open dialogue with your builder. If there is something you don’t understand or can’t visualize, you need to tell him. If you are unable or unwilling to make decisions, your builder may have to make those decisions for you. If you do not speak up or participate actively in the process, the risk is that your new home, including its cost, may turn out differently than you planned.

Next Steps:

• Keep up with J. Thompson Builders on Facebook and Twitter.
• Learn more about J. Thompson Builders, J. Thompson Restoration, J.T. Unique, Asset Inventory Protection and visit our Custom Home Gallery.

The estimated price for building a home is just a starting point. Costs for products and materials range, starting at economy prices and increasing to luxury levels. Any changes in product choices, as well as other changes to the project can greatly affect the final price of building.

But going into the process with some tips in mind can keep that budget in check!

Work closely with your builder, and more importantly chose a builder you work well with. Because you’ll spend hours talking to your builder about your ideas, it’s important you choose one who understands your vision, and can easily put your ideas into action. It will also save you time and money throughout the project.

Before you start the building process, spend the time and money to choose a detailed design plan. When you have the plan ready, costs are estimated and you’ll know what to expect during the construction process.

Select the materials and products you want to use in your home before construction begins. Be very detailed about the products you choose including brands, features and styles. Follow through with selecting the products you have chosen. Making changes to material choices is not only often costly, but doing so may set back the building schedule.

Set a flexible budget. Unexpected expenses do occur. Not all costs are “known” when you start building. While upgrades can affect the cost, so can unexpected costs related to permits, excavation and foundation work. Factor these costs in by adding 10-20% to the total expected cost; it will help you stay within budget, and you may remain under budget if you’re one of the lucky few that does not incur any unexpected expenses.

Request all estimates in writing. Never agree to verbal agreements. A contract helps you keep track of expenses, and the contract can be amended if extra work is added. Never pay contractors up-front. A down payment may be required, but paying a contractor in full could make you vulnerable to dishonest contractors who don’t finish the work. Those contractors may still keep your money, forcing you to spend more money when you have to hire another contractor to finish.

Track all expenses, using a spreadsheet, project planning program or another program appropriate for recording expenditures and project details. Google Docs is a free online program, and there are many others available, including project software which gives you features to plan, organize and manage the project. Keep the document updated as expenditures occur, and review your budget frequently. Stay on budget as much as possible; only make exceptions when necessary and reconsider changes when it doesn’t seem practical.

Next Steps:

• Keep up with J. Thompson Builders on Facebook and Twitter.
• Learn more about J. Thompson Builders, J. Thompson Restoration, J.T. Unique, Asset Inventory Protection and visit our Custom Home Gallery.

Photo credit, Tax Credits

Project scheduling involves the challenging task of dividing the home building process into jobs. Each job should start at a certain point, with a projection of how long each job will take. The objective is to complete building the house in the quickest time possible, with as little money invested as possible. Certain jobs can run concurrently, but other jobs can’t start until others are completely finished. And what any client having a new home built quickly realizes is that construction is not a smooth process with absolute completion dates. Each project varies widely in its process, and variables like weather and changing contractor schedules affect the timeline.

The entire building process is usually completed within 5-7 months. The more customizations in a home, the longer it will likely take. The more detailed the house plan, the more time it will take to build the house.

A new home construction project will include:

1. The home plan design
2. Finalizing plans, estimates, signing contracts
3. Applying for permits
4. Site work, clearing the ground
5. Establishing power to the site
6. Foundation work
7. Framing
8. Roofing
9. Installing windows and doors
10. Siding
11. Plumbing, electricity and HVAC
12. Insulation
13. Interior trim
14. Flooring
15. Cabinets and countertops

Important facts you should know about project scheduling…

1. Expect your builder to provide a schedule outlining what phases of the home building project will be completed, and when the work will occur. Your builder will know the exact order things need to be accomplished and in what time frame it should happen. The builder should also outline what the client needs to accomplish, including any selections or decisions the client needs to make.
2. Change orders alter the scope of the project. Your builder will work with you to alter the plan as necessary, in order to accomplish the preferred outcome. But know that any change will increase the cost as well as extend the time of the schedule. Contractors often have lead times of weeks, not days, and they may not be able to rearrange their schedules at the last minute.
3. Remain flexible. Develop a construction schedule with your builder, but understand your plan must be flexible, and you must be willing to exercise patience when changes to the plan arise. Delays often happen whether it’s in receiving permits at a later than expected date which then pushes out the dates the contractors have agreed to, or delays may result when contractors have to change the schedule because of scheduling conflicts with other projects.

More about the home building process:
Why Build? »
What You Can Do NOW to Plan  Your Dream Home »
Choosing a Home Builder: Comparing Custom Building and Production Building »

A beautiful custom home in a beautiful country setting

The typical home buyer may not understand builders are most often classified as either a custom home builder or a production builder.

Some definitions:

Custom: (custom-built) custom-made: an item made to the customer’s specifications. (via Princeton University)

Production: (also called mass production): the manufacture of goods in large quantities, often using standardized designs and assembly-line techniques. (via The Free Dictionary)

A little history lesson:

Production builders accounted for little of the home building market before the 1950s. When the population boom occurred during that time period, home building changed. Before the 1950s homes were built one house at a time, for one customer at a time. But as the population grew, and more people required homes at a greater rate, some home builders began changing their model to mass production. Because of the volume of the houses production builders built, along with their cheaper means of production, they were able to offer homes at prices below what custom builders could. Production builders formed home building corporations, focusing more on the amount of homes they could build and sell, instead of focusing on individual buyers.

But how do you know the difference?

While the difference in the definition of custom vs. production is fairly clear, with the amount of home builders on the market, sometimes it’s difficult to figure out exactly who does what.

The National Association of Home Builders provides these tips to help you tell the difference.

Custom home builders:

• Build on land you own. Although, some custom builders also build on land they own.
• Build one-of-a-kind houses. A custom home is a site-specific home built from a unique set of plans for a specific client. Some custom builders may offer design/build services.
• Build single-family homes.
• Are generally small-volume builders (those that build 25 or fewer homes a year).
• Tend to build high-end homes.

Production home builders:

• Build on land they own.
• Tend to use stock plans, but usually offer a variety of plan choices and options.
• Build all types of housing — single-family, condos, town houses, and rental properties.
• Are large-volume builders (those that build more than 25 homes a year).
• Generally build for all price points — entry level, move up, luxury, etc.

What does it all mean?

Custom building is for those home buyers desiring to personalize how their home is built. In custom building the homeowner is usually much more involved in the process, and the builder focuses on working closely with the client. Custom homes are typically thought of as more expensive, but not necessarily. If you were to make all the changes you desire to a production home – which most production builders will not allow – the cost would be equal, or even cost more. With a custom home, buyers are investing in a home specifically suited to their needs and lifestyle.

Yes, you can build during the winter. Successful winter building was the topic of a Chicago Tribune article published in 2011, just as the winter months were hitting the midwest area. The article aimed to assure people winter building is not so bad. Some encouraging words were offered by C&C Shenuk Construction’s Chris Shenuk, “In the old days, everyone shut down and hibernated for the winter. Now, it’s a different ballgame. We’ve got new products and new technologies that allow us to work all the way through.” And Ryan Weitman, co-owner of Restruction General Contractors points out, “As long as the house is sheeted with vapor barrier, and you keep temporary heat going, everything can be done on the inside. Exteriors are doable when temperatures are in the 30s and high 20s as long as you’re not dealing with ice.” And is snow much of an issue? Shenuk thinks not, “It’s a lot easier to tarp snow than to tarp rain to keep everything dry. Snow is much more forgiving than rain.”

Cold weather concrete work is truly not as difficult as one might think. Only the air temperature is usually below freezing, and various methods to ensure the concrete is not affected by cold can allow additional costs to be minimized. A good resource to consult and make sure your contractor is using is the ACI 306R-10 Guide to Cold Weather Concreting.

For those who have already secured a lot, you may have no choice but to consider winter building. The costs of paying for a lot build up over the chilly months, and getting to work right now may weigh easier on your wallet.

But the Chicago Tribune article still brought up some valid points about why you might want to wait until spring to build. Any delays in construction as well as the “extras” needed for winter building including tenting, portable heaters, or if you have to use cold weather concrete additives, add to the cost.

If you decide winter is not the right time for you to build, there’s still plenty of preparation you can do during the winter months to ready for spring/summer building. For more help with that, read our blog Prepare for Spring/Summer Home Building During the Winter.