Many of us have literally built their own home or employed a general contractor to build it for them. Some adore their new home. Some are extraordinarily disillusioned. Lots more have discovered too late the project was more than they could handle. Before you commit all of your money and time to building your "perfect" home, check with a Merritt Island real estate professional and consider these common pit falls:
Not planning for guaranties and inspections.
There are rural areas in Idaho and Utah that literally have no building code requirements and no building inspectors. You can take the axles off your fifth wheel or throw some cardboard over some straw bails and call it home. You could be planning something more important. What happens when you finish your home and decide you would like to take a loan out against it? If you need a loan on a newly constructed home, the builder will be needed to provide at least a 1 year guarantee. What if you poured your own foundation to save cash? A builder isn't going to warranty work they didn't perform.
You can hire engineering firms to inspect your work. They would like to inspect the project periodically DURING construction. City and county inspectors like to inspect during construction. What about if the inspector feels you need more supports in your crawlspace? You can disagree you have built to code. Every day you spend discussing IRC 2009 as adopted by your local town council, you spend $100 in interest and the inspector justifies his job. Have a plan in place , and a budget, before breaking ground, to insure your house will be able to get a Certificate of Occupancy and a home warranty.
Ignoring financing.
It is no fun paying over $100/day on interest for a home you cannot live in. Construction loan interest is mostly 3 to 4 times more expensive than long term lending. For example, if current long-term rates are 4%, expect to pay about $4000 in interest for the first three to 4 months for every $100k loaned. Construction loans usually have stiff rate rises if not paid back inside six months generally.
Time is unquestionably important when building! Plan for the astonishing. What will happen if your plumber finishes on time, but the only plumbing inspector for your town is on a fourteen day fishing expedition? The town won't be accountable for the additional $1400 in interest.
Letting the lender set your position.
Suppose your lender has pre-qualified you for $250,000. Many of us take the number a bank gives them and build based totally on what they can get instead of what they want. Say they find a chunk of land for $75,000 and get a bid from a contractor of $155,000 for a home. They've picked the location and structure they need for $230,000. The $20,000 difference between the pre-qualification and the primary guess offends their subconscious.
They are forced to find another $20,000 in extras and options. What happens if a local employer lays off 1,000 folks during construction and the appraisal for the home drops to $245,000? What if IRs change during construction and now you are qualified for $240,000? Building to the maximum amount you can loan is an awful risk. Life is fast changing. One adversary change and you might need to bring an extra $10,000 to closing or maybe not be in a position to close .
Not planning for guaranties and inspections.
There are rural areas in Idaho and Utah that literally have no building code requirements and no building inspectors. You can take the axles off your fifth wheel or throw some cardboard over some straw bails and call it home. You could be planning something more important. What happens when you finish your home and decide you would like to take a loan out against it? If you need a loan on a newly constructed home, the builder will be needed to provide at least a 1 year guarantee. What if you poured your own foundation to save cash? A builder isn't going to warranty work they didn't perform.
You can hire engineering firms to inspect your work. They would like to inspect the project periodically DURING construction. City and county inspectors like to inspect during construction. What about if the inspector feels you need more supports in your crawlspace? You can disagree you have built to code. Every day you spend discussing IRC 2009 as adopted by your local town council, you spend $100 in interest and the inspector justifies his job. Have a plan in place , and a budget, before breaking ground, to insure your house will be able to get a Certificate of Occupancy and a home warranty.
Ignoring financing.
It is no fun paying over $100/day on interest for a home you cannot live in. Construction loan interest is mostly 3 to 4 times more expensive than long term lending. For example, if current long-term rates are 4%, expect to pay about $4000 in interest for the first three to 4 months for every $100k loaned. Construction loans usually have stiff rate rises if not paid back inside six months generally.
Time is unquestionably important when building! Plan for the astonishing. What will happen if your plumber finishes on time, but the only plumbing inspector for your town is on a fourteen day fishing expedition? The town won't be accountable for the additional $1400 in interest.
Letting the lender set your position.
Suppose your lender has pre-qualified you for $250,000. Many of us take the number a bank gives them and build based totally on what they can get instead of what they want. Say they find a chunk of land for $75,000 and get a bid from a contractor of $155,000 for a home. They've picked the location and structure they need for $230,000. The $20,000 difference between the pre-qualification and the primary guess offends their subconscious.
They are forced to find another $20,000 in extras and options. What happens if a local employer lays off 1,000 folks during construction and the appraisal for the home drops to $245,000? What if IRs change during construction and now you are qualified for $240,000? Building to the maximum amount you can loan is an awful risk. Life is fast changing. One adversary change and you might need to bring an extra $10,000 to closing or maybe not be in a position to close .
About the Author:
Article written by Timbalan M Majorie a Port St John real estate agent. If you're looknig to build a new home, please search out the guidance of a professional by visiting Timbalan's Rockledge real estate site.
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