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From lot loan to building your new home: everything you need to know


This story is sponsored by Goldenwest Credit Union. Learn more about Goldenwest Credit Union.

The American dream wasn’t built overnight, but your American dream home? Well, that might not take as long as you think — especially if you’re familiar with the process.

According to National Association of Realtors, it typically takes three to six months to build a home. That said, a lot of factors can impact that timetable — from inclement weather to the experience of your builder to the type of soil on your lot.

Before you break ground, be sure you understand the basic steps involved in building your brand-new dream home.

Find and purchase your lot

What’s riding on a lot? Well, a lot. As they say in real estate, location is everything, so you’ll want to be sure you’re familiar with the neighborhood, district schools and surrounding community. Keep in mind that, in many subdivisions, your lot comes with a builder attached, so you’ll want to be as comfortable with their work as you are the land.

You’ll also want to check any building requirements, restrictions, CC&Rs and HOA rules associated with the community to make sure you won’t have to compromise your dream design.

If you’re not paying cash for your lot, you’ll need a lender that understands your timetable and can offer you competitive rates and/or attractive perks on a lot loan. This is a loan for buyers who want to secure their land but may not be starting construction immediately. Goldenwest Credit Union, for example, offers borrowers of lot loans a credit for half of the loan origination fee toward a Goldenwest construction loan.

Design, plan and budget

The magic of a newly built home begins with the design. Of course, depending on your chosen lot, you may simply be choosing between a variety of home plans and designs. If that’s the case, you’ll still want to add your personal touch with customizations that suit your family — so be sure you have a list of must-have features with you when you meet with your builder or designer.

Without these restrictions, you can start your dream design as soon as you choose an architect. According to U.S. News & World Report, you’ll want to gather inspirational photos that illustrate your preferred home style, along with the basic details of your home plan, before meeting with your architect.

Share your budget requirements, preferred home size, desired number of bedrooms and bathrooms and whether you prefer one level or two — or more! Your architect can help you understand what’s feasible within your budget, or suggest alternative features, building materials or plans that may be more cost-effective.

Choose a builder

The dream builder doesn’t just come with experience, reliability and trust; they also suit your style. If you’re choosing your own builder — rather than using one contracted with your subdivision or community — you may want to start with style.

Attend a Parade of Homes in your area so you can see the work of local builders up close. When you find a home — or, preferably, several homes — you like, interview each home’s builder. With your plans in hand, each builder should be able to give you a general idea of their timeline and costs. When getting bids, be sure it includes a comprehensive cost breakdown. This will be more helpful in your planning than a bottom-line number.

Get a construction loan

Securing a loan can be complicated; securing a construction loan can be a pleasure — if you find the right lender. According to Goldenwest Credit Union, construction loans are typically termed at 9 to 12 months, after which the loan is replaced by long-term financing.

And even though your construction loan is paid to your builder — not to you — you’ll want to make sure you’re getting a competitive rate and attractive terms. The right lender will offer both — and help you understand the benefits of closing on your construction loan and long-term financing simultaneously (called a one-time close.)

Submit your plans, costs and building contracts

Once you and your architects or builder have determined your home plans and associated costs, you’re ready to get a buy-in from your lender — literally.

As with a traditional mortgage, your lender will need to “appraise” the value of your potential home, using building plans, site plans, cost breakdowns and sales comps within the community or neighborhood. Additionally, your lender will review your building contracts to determine when and how construction loan funds will be disbursed.

Close your loan and start construction

Closing your construction loan is a big milestone; it means you’re ready to break ground on your dream home. Depending on your situation, you may be able to choose a one-time or two-time closing.

With a one-time closing, you’ll close on both your construction loan and long-term financing all at the same time with the same lender — which means all your interest rates are locked in at closing. Your construction loan converts to a traditional mortgage upon completion of construction.

With a two-time close, you’ll close on your construction loan and long-term financing separately, with no interest rate lock for your long-term financing at the time your construction loan closes.

With your loan (or loans) closed, grab a shovel; your (American) dream home awaits. Contact a loan specialist at Goldenwest Credit Union today to start building the home you've always wanted.