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2. construction

Construction Loan “Inside Secrets”
Finally! Discover How to Obtain the
Best Construction Loan from the best
lenders to Build Your Dream Home.
After reading the following construction loan “Inside Secrets” you will know more about construction
loans than most loan officers. Also, you will have information that can literally save you thousands in
building your new home and in obtaining the best possible construction loan. More importantly I’m going
point you in the right direction and help you find the best banks to fund the construction project.
R. Gomez
(866) 211-3344
Introduction
I started out working in the construction loan business way back in 1984. It was my first real job
and I was a mere 25 years old. The interest rates in 1984 were 14%, yes, you read that correctly.
The crazy thing is that interest rates the year before were 17%. Interest rates will always go up
and down because everything in life especially the real estate market. With the many different
loan products that exist in today’s marketplace homeowners like never before are searching for
the best loans that fit their particular needs.
Over the years I have seen a lot of changes in the construction loan industry. First of all, the only
type of construction loan that existed back in the 1980’s was a 12 month construction loan. The
banks would provide you or your builder up to 12 months to build a home and then you would
have to refinance upon completion. If you couldn't refinance your new home the banks could
foreclose on your loan and own your newly built home. Today's popular construction to
permanent loan solved the refinance or conversion part of the construction loan by combining the
construction part of the loan with the end loan.
With today's technology in the home lending world, you can pretty much get any type of
construction to perm loan almost any way you want whether it’s an arm product or a fixed
product. The problem is there are hundreds of banks that simply do not offer or care to offer
construction loans. Some of the best advertised construction loan lenders have below average
programs and/or high interest rates. To top it all off many banks in 2008 stopped providing
construction loan all together.
You literally have to do your homework to find the best construction loans available in today's
marketplace and the only way to do that is through a construction loan specialist. Someone who
is not only experienced with construction loans but someone that can be objective and can tell
you the pro’s and con’s of all the lenders. The problem is that until this e-book was written no
loan officer or bank was will to tell you the inside secrets.
So I wrote this report to help you strip away all of the construction loan mysteries out there and
help you find the best lenders, loans, rates and best service. I have personally built 2 homes over
the past twenty years and have funded millions of dollars of construction loans for customers just
like you.
Some of the things you will learn in this report are industry secrets and most loan officers and
lenders will panic at the sight of the information in this e-book such as how loan officers
structure their construction loans for profit or how loan officers price out their commissions.
Just remember no matter who you decide to work with if you want the best service or product of
any kind you need to always work with a specialist instead of a jack of all trades. That small bit
of advice is worth its weight in gold, for some reason including myself at times people are drawn
to jacks of all trades.
Table of Contents for the 2009 Complete Construction Loan Inside Secrets
1. What type of home are you planning on building?
2. How to save a bundle in obtaining your house plans.
3. What comes first the land purchase (egg) or the construction loan (chicken)?
4. Should you hire a builder, supervisor or become an owner builder?
5. How will your builder determine exactly how much your home will cost to build?
6. Obtaining your building permit and when is it required?
7. Should you go directly to your local bank or to a loan broker for your loan?
8. What experience does your construction loan officer have and does it matter?
9. Finding the best construction loan and what are your choices.
10. All banks have access to the same rates and the only reason everyone ends up with a
different rate at closing is directly related to how much your loan officer and bank has
profited.
11. Exactly which banks are currently providing construction loans.
12. Qualifying for your construction loan, exactly how is it done?
13. Understanding the good faith estimate and how not to be taken by the oldest trick in the
book "Bait and Switch"?
14. How does the construction loan process work by looking at the big picture?
15. Construction loans are actually three loans in one and how to fill out the construction
loan package properly, (Borrower, Project and Builder).
16. Should you lock in your construction loan before you start building or let the interest
rate float?
17. Opening up escrow and obtaining title insurance. (Some states require an attorney)
18. Putting the entire construction loan budget together (big picture).
19. What are interest reserves and contingency funds doing in your budget?
20. Ordering your appraisal based on your house plans and land to determine the loan to
value and the projected finished value.
21. How much money will you need for a down payment and how that determines the bank
required loan to cost (LTC) and cash equity as some people will call it?
22. How does your builder get paid while your home is being built and why it matters to
them and more important why it matters to you (draw versus voucher)?
23. Your construction loan is finally approved and why the bank keeps asking for more
things and how to never take it personally.
24. What type of construction loan insurance is required when building your new home and
who is required to obtain it?
25. Signing loan documents and making sure your loan officer is on standby to answer your
questions.
25. Your house is complete you now have your notice of completion and it’s time to convert
the loan to the permanent financing and move in (one time close or refinance).
26. Your house is complete you have your notice of completion and it’s time to convert the
loan and move in.
1. What type of home are you planning on building?
The first Chapter is to help you determine the type of home to build.
Most people build a stick built home made out of 2 X 4’s, 2 X 6’s, 2 X
8’s, 2 X 10’s etc, but did you know that you can build a super efficient
home with new technology with modern materials? Once you
determine the type of home that you would like to build I will then
take you step by step in obtaining the best construction loan
available.
Tips For Saving Money On Construction Of Stick Built Homes
If you’re in the market to have a home built, you’ve no doubt discovered that this venture
can be costly. Even if you have your own land already lined up, the expenses involved with
having a stick built home constructed on site, from the ground up, can be staggering.
Fortunately, there are ways you can cut corners with the costs without sacrificing at all in
the quality department.
There are opportunities to save in costs at every turn when you have a home built on your
own land. From the actual design work right down to the finishing touches of decorative
enhancements and appliances, there are avenues you can take to save money. When the
right steps are taken, it is possible to have the home of your dreams built without paying an
arm and a leg.
Getting Designs The Affordable Way
In order to have a home created on your site, you will need blueprints for contractors to
work from. Hiring an architect to produce custom designs can be cost prohibitive, but it can
sometimes be worth the price. There are, however, other ways to get your hands on
blueprints and designs without paying a small fortune in the process. If you don’t have your
heart set on a floor plan and elevation that’s all your own, you can look into buying readymade plans from builders or architectural firms.
To obtain ready-made blueprints, the Internet can be a powerful tool. Now, if you have your
heart set on a custom design, an architect is worth the hire. To enjoy the best possible
pricing, make sure to obtain multiple quotes and do perform background checks before
settling on a final selection. When it comes to the blueprints that will be used for every
phase of construction, cutting corners for pricing alone isn’t always the wisest thing to do.
Before selecting final designs, do take the time to consider the pricing of materials involved
in your dream plans. In some areas, the prices on building materials can be greatly different
than in other geographical regions. This can have an impact on your design selection.
Do It Your Self (Where You Can)
No, you probably don’t want to build a stick built home all by yourself! You can, however,
save on some major expenses by doing some of the work personally. Even if you are only
able to remove contractors from one portion of the building project, you can save yourself
some serious cash along the way.
Some of the areas you might want to consider tackling personally include:

Pulling the building permits yourself and foregoing a general contractor – If you play
the head man (or woman) on the job, you can save yourself some major cash. You
will, however, face a lot of work. To make sure your home is properly built, you will
have to select the skilled trades companies, schedule work and make sure
inspections take place when they are supposed to. By doing this, you assume a lot of
responsibility for the outcome of your home, but you can sometimes obtain much
better quotes than a general contractor might offer on subcontracted work.
Remember, your general contractor will put a price over and above the
subcontractors’ for his or her supervising the work.

Ordering materials – Homeowners can sometimes obtain better pricing on building
materials if they take the time to shop around. Keep in mind that this isn’t always
the case. To get the best possible deals, check with your contractors to find out their
pricing and then look on your own, as well. Sometimes it pays to look into recycled
materials where feasible.

Block and/or framing – Do-it-yourselfers are sometimes able to handle these areas
of construction with a little help. It is imperative, however, that this work be
performed with precision, so do be sure of talents before diving in.

Finishing work – Do-it-yourselfers can often tackle the end stages of home
construction with a relative amount of ease. Things like tiling floors, finishing
bathrooms and even installing kitchen counters can be cut out of the contractor
equation for a decent amount of financial savings.

Appliance purchases and installation – Purchasing and installing the appliances to
finish off a house is one area that it really does pay for homeowners to tackle
personally. While builders will have access to these finishing touch items, they won’t
have the time or desire to shop around closely for sales, better deals and even
scratch-and-dent items.
When there is a need or desire to save money on home construction, tackling even the
smallest of jobs personally can make a big difference in the bottom line pricing. Do make
certain not to bite off more than you can chew in regard to skill and/or time.
Other Areas You Can Save Money On
Beyond overseeing some or all of the construction process personally, there are other ways
you can save money on your dream home. These things can all add up to some big savings
without sacrificing the outcome or its quality:

Scheduling construction appropriately – While it’s true you have no control over the
weather, you do have control over when your construction project actually starts.
Weather delays and damage caused by weather can cost you a lot of money out of
pocket. To avoid problems as much as possible, try to schedule your building project
during your geographical region’s standard dry time. Building, for example, on the
cusp of winter’s first snows can lead to costly delays.

Scale back slightly – If you find your dream home is going to cost too much to build
no matter how many corners you cut, try scaling back a little bit. By reducing the
square footage even slightly, you can save yourself thousands. Instead of a three-car
garage that you don’t need, for example, go with a two. Small, structural alterations
might require an architect to assist with, but they can shave a lot of money off the
end product.

Make finishing alterations – One of the best ways to save on expenses without
structurally changing your home’s design or sacrificing on the quality of the shell is
to change plans for the finishing touches. Instead of using imported tile for the
flooring, for example, pick a domestic stock. Using less expensive cabinets in the
kitchen and bathrooms, too, can add up to savings. Any area where you can achieve
your standard of aesthetics without using the most expensive materials can help you
keep the final costs in check.
Making the choice to have a stick built house constructed on property you already own is an
excellent way to enjoy real cost savings without giving up on your dreams. When you take
the right steps to ensure quality, you can keep construction costs in check and still have a
house you’ll be proud to call home.
Saving Even More On Modular Homes (Do not confuse Modular
Homes with basic manufactured homes on wheels).
You’ve done your homework. You’ve explored all your options and weighed them against
your budget. There’s no better way for you to have the home of your dreams and keep your
costs down at the same time than to have a modular home built and transported to your
property.
This is an excellent choice indeed! Modular homes provide potential owners with an
incredible opportunity to enjoy high-quality construction with very reasonable pricing. The
question that might be nagging at the back of your mind, however, is if it’s possible to make
this already lower-cost building option even more affordable?
The answer is a big yes if you know how to buy and what expenses you can reasonably
reduce or cut out of the equation entirely.
Modular home construction does present some challenges for finding money-saving options,
but if you work with your builder, you can keep your costs low and your quality high.
The Modular Home Difference
Modular homes are a little different than standard site- or stick-built homes. Unlike
traditional construction, a modular home is built almost entirely within a controlled
environment. When the building phase is nearly complete, your home is put on a truck (in
sections) and delivered to your door for final assembly.
The modular home difference brings with it some inherent cost savings over stick built
properties. It does, however, cut out a lot of opportunities for you, as the property owner,
to cut corners by doing work yourself. Don’t worry though – there are still some tricks for
shaving dollars from the bottom line.
The Inherent Money Savings
Modular homes do deliver a lot of potential savings right off the bat over traditional
construction methods. The reason why these homes are more affordable than site-built
properties is not found in a lack of quality either. It’s all in the design of how construction
takes place. The inherent savings are found in:

The stock designs – Most companies that create modular homes operate off set
plans. This means the same blueprints are utilized over and over again.

The assembly line – Modular homes are built with attention to detail, but they are
constructed by crews that know the models inside out and backwards. The assembly
line fashion in which they are built can save you, the homeowner, money.

The controlled environment – Modular homes are often built under very sheltered
conditions. This means common construction delays, such as weather concerns, are
virtually removed from the equation.

The bulk buying – Companies that specialize in modular home construction tend to
order their materials in bulk. This saves them, and potentially you, money on
materials.
Modular homes, by design, are less expensive to build than homes constructed on site. This
doesn’t mean that you can’t save even more by taking a step back and examining some
options.
Selecting The Right Builder Matters
Modular home construction companies are not all alike. Since your home will be largely built
out of your own line of view, it is imperative that you select a good company – not only for
pricing and plans, but also quality. To ensure you make a sound selection, consider these
things:

Reputation and experience – Some companies have been building modular homes for
years and years with very few complaints. These companies might charge a little
more than others, but the peace of mind can be worthwhile.

Plans and freedoms offered – If you want the home of your dreams built, it doesn’t
pay to select a company that isn’t at least a little flexible on the plans. Chances are
you will want a few changes made. A good company can accommodate without
charging you a ton in the process.

Localized licensing – Make sure the builder is truly licensed to work in your area. A
company should have authorization in your state.
Take the time to review the options of building companies closely. Obtain multiple quotes,
look into background, licensing and customer reports before making a final selection. It
might be that a slightly more expensive builder ranks higher. This is okay. You can save
money elsewhere on the project. It doesn’t pay to put quality on the line in favor of saving a
few bucks during the production phase.
Work With Your Builder
Just because a modular home construction company will handle most of the building work in
a controlled environment, doesn’t mean you can’t get in on the act to save yourself money.
Chances are a few pieces of the puzzle will involve “optional charges” the builder can handle
for you or not. These are your opportunities for potential price savings.
If at all possible, compare your builder’s pricing versus what you can get by hiring a
different contractor or doing the work yourself on such things as:

Site preparation – Land clearing, slab pouring, plumbing and electrical work will still
need to be done onsite. If you can tackle any of these steps personally and meet
inspection, you will save yourself money. It might be that you can hire a
subcontractor for less than your home builder will charge. You won’t know if you
don’t check these things out!

Finishing touches – If you work with your builder, you might be able to save yourself
some money on the actual finishing touches for your home. Painting, floor laying, tile
work and other end-phase pieces of construction might be things your builder would
be willing to take out of the equation so you can do them yourself. Some builders,
however, may not allow this, but it doesn’t hurt to check if you have the ability to
perform the work personally.

Appliances – If your chosen builder cannot cut pieces out of the puzzle for you to
tackle personally, you can still save money on the process of turning your house into
an even better home. Take on the appliance purchases personally and you will likely
save yourself a fair amount of money. To enjoy the best savings, shop around, look
for scratch-and-dent items or even recycle your old appliances for maximum cost
savings now.

Landscaping – This is an excellent end-phase area that homeowners can handle
themselves for big money savings. If you have even a slightly green thumb, you can
tackle the landscaping around your home once it’s placed or do your own comparison
shopping for the most affordable contractor.
Choosing to build a modular home is a great way to save money right out of the gate. There
are often ways to make this already pound-wise venture pay off even more. Take the time
to review your options, work with your builder and see where you can have the most impact
on the bottom line without impacting the quality of your project.
How To Save Money With a Super Efficient Structural Insulated
Homes (SIPS)
With the high costs of energy only getting higher when it comes to home-based electricity,
many people are looking to fight back from the start. If you’re one of those people and the
idea of building a structural insulated home to keep your electric or gas bills down and more
money in your pocket appeals, you’re on the right track.
While there’s no denying this type of construction can save some serious cash in the long
run, it can cost you a fair amount at the start. This is, unless you know how to save money
on the actual construction.
It’s true! If you take the right steps, you can have a structural insulated home built from the
ground up without breaking your budget in the process. There are a number of ways you
can have the home of your dreams constructed for a fraction of what other homeowners
might pay. The key lies in exploring all your options and then choosing the best moneysavings steps to fit your abilities and even lifestyle.
Just What Is A Structural Insulated Home?
Structural insulated homes, or SIPS as they’re called in the business, are created using
specialized materials. Rather than plain 2-by-4s, sheets of plywood and other framing
materials, sips call for the use of special panels to create the walls and roofing. These
panels are made using oriented strand board plywood and polyurethane, which is a much
better insulator. This means they hold cold air in during the warmer months and keep heat
from escaping during the winter.
The panels created for structural insulated homes offer a few choices, depending on the
manufacturer involved in the purchase. Some companies, for example, sell panels in preset
sizes for cutting and fitting on-site. Others also sell panels that are precut to fit plans so a
house will go together almost like a giant puzzle. Panels range from those meant for roofing
and wall structures to those with a finished exterior to quickly become the outer walls in
rooms.
The advantages of going with insulated panels over regular wood framing are found not only
in the potential ease of construction, but also in the future energy savings a home will
enjoy. Need more content
How Not To Get Taken To The Cleaners On A Timber Frame Home
The spectacular natural beauty that timber frame homes boast make them a favorite for
anyone who likes a rustic look that blends perfectly with a bit of upscale elegance.
Unfortunately, these homes can be rather costly to build. Don’t worry though! If your heart
is set on a timber frame construction, there are measures you can take to save yourself
some serious money along the way.
When you decide to have a timber frame home built on your own property, the
opportunities for saving on expenses without sacrificing a lick of beauty or quality are
almost endless. From the actual plans right down to putting counters and cabinets in the
kitchen, you can cut costs to bring the total pricing of your dream home in line with your
budget.
A Look At Timber Frame Homes
Timber frame homes differ in appearance from those constructed primarily of block or other
building materials. In modernized designs, these homes blend wood framing, drywall, brick
and even stone to create a number of different looks. The idea behind many timber frame
home designs today is to blend the beauty of wood on both the inside and outside of a
home with other materials such as large, open windows, finished drywall and stone.
Some common features in timber frame homes that make them stand out include:

Use of wood beams and interior framing – To gain the rustic look that timber frame
homes are noted for, a great deal of attention is paid to little details. Rooms, for
example, will often have exposed wooden beams and framing.

Big windows – Since timber frame homes happen to be quite popular in areas noted
for their geographical beauty, large windows are often favored to bring the feeling of
nature in and prevent a blocking of any views.

Creative use of natural and manmade materials – While timber frame homes often
use drywall in some areas of the home, it’s not uncommon to see stone or brick work
walls in other areas of a home to increase the visual impact.

Open floor plans – Timber frame homes are known for their spacious, open floor
plans and high, vaulted ceilings.
Designs Matter
Beyond the initial land purchase, the first major expense you’ll run into when the desire is
to build a timber frame home involves the actual blueprints. You have to have these before
you can go a step further and they can cost you. There are ways, however, to get great
plans without breaking your piggy bank beyond repair. The two main options are:

Buying stock plans – There are companies that specialize in the creation and sale of
stock plans for timber frame houses. While this might mean you’ll share a floor plan
with a homeowner across the country, it can save you some serious cash. Before
purchasing plans that are ready-made, shop around based on the actual designs, the
reputation of the firms offering plans and pricing. It is vital that your blueprints be
accurate for your construction project to actually result in the home of your dreams.

Starting at scratch – Should you have an idea in mind for the home of your dreams,
you might find sparing the expense of an architect for a custom design just isn’t
worthwhile. This is perfectly okay. You can still save some money by shopping for
quotes from reputable, licensed architects and you can cuts costs a little further
down the road to make up if you must.
Getting the plans for your dream home is the first major hurdle and expense you will face.
Even if you find yourself paying full price for the blueprints, don’t worry too much. There are
still plenty of opportunities to save money and still have a spectacular house out of the deal!
To Kit Or Not To Kit?
If you’ve been looking into timber frame homes for a while, you know it’s possible to
purchase “kits” for their construction. Whether this is the best route to go for quality and
pricing will depend on a number of factors. To make a sound decision, consider these
things:

What is included in the kit – Kits for building a home are not like model plane or train
kits. You will not get everything in a neat, tidy box to construct your home from the
ground up. Some of the best kit purchases do include such things as the blueprints,
all the wood needed, other structural materials, some finishing materials and even
electrical, plumbing and lighting fixtures. Pay attention to what’s included and what’s
not.

The pricing if you bought the items yourself – Before deciding on a kit, do take the
time to price out the materials on your own. It could be the kit is the best way to go.
It might be, however, that you could save thousands by putting together your own
materials. Keep in mind though that kits for specific blueprints often come with
precut materials, which can cut down on labor costs.
Other Money Saving Opportunities
The potential for money savings when you’re building your own home are almost endless. If
you happen to have your own land on which the home will go, your options for cutting costs
will expand greatly – even with a timber frame home. The opportunities to save can be
found if you:

Take on a big role in the process – Property owners are able to act as their own
general contractors if they so choose. This can take a huge labor expense out of the
final costs. To pull this job off effectively, you will need to be able to dedicate some
serious time to your construction project. As your own builder, you’ll need to pull
building permits, hire subcontractors, schedule work, order materials and even
schedule inspections. This is not an easy job, but it can save you big time on the
bottom line.

Pull out your tools – If you’re handy with tools, you can take over some of the
phases of construction yourself and cut out subcontractors along the way. Just make
certain you are comfortable with the work you take on. If you’re not, you could
sacrifice the quality of your home and end up costing yourself more in the long run.
Remember though, even the smallest of jobs can save you on the cost of
subcontractors. If, for example, your home has drywall included in the plans,
consider doing the painting yourself.

Do your own finish shopping – If you aren’t very good with tools, you can still
assume a big role and save yourself money by doing your own finishing materials
shopping. This means buying things like your counters, cabinets, flooring and
appliances. Comparison shopping and even visiting closeout and scratch-and-dent
stores can help you rack up some major savings on the things you need to turn your
house into a real home. To save even more, consider doing the installation of these
things on your own.

Use your noggin – Whether you have a general contractor oversee all the work or
you do it yourself, scheduling is everything if you want to save time and money on
your project. Use your noodle when picking the month you plan on starting
construction. Should your project run up against a rainy, windy or snowy season,
you could find yourself paying in material replacements or having to deal with long
stops in work.
If you have your heart set on a timber frame home, you’ve made an excellent selection. The
natural beauty of this style of construction is hard to top. While the materials can be costly,
you can save a lot of money along the way if you take the right steps to cut corners without
cutting quality.
Tricks For Getting The Best Pricing On Concrete Homes
Unless you’re lucky enough to win a lottery that involves a free dream home, getting a
great house is going to cost you some serious money. You don’t have to hold the winning
ticket, however, to cut some corners on the pricing without sacrificing a bit in the quality
department. Even if you’re in love with concrete construction for its beauty, strength and
durability, you can save yourself major cash if you take the right steps.
The best way to start realizing savings in the construction of a concrete dream home is to
act as the owner builder over the project. This will require some work on your part and you
will need to have the land lined up and in your name. While the process might make you
pull your hair out at times, it can be very worth your while for the money you will save and
the pride you will have in the end product.
What Does An Owner Builder Do?
This simple answer to this question is as much or as little as he or she wants. A very handson owner builder (who wants to save a ton of money on the construction of a concrete
home) will:

Act as the general contractor on the job – This will involve everything from pulling
the permits to overseeing all the work on the property. It will also entail hiring
subcontractors, scheduling work, making payments and setting up inspections. While
there is a tremendous amount of work involved in supervising the construction of
your own home, the potential cost savings is high. The fact is if you oversee the
project, you won’t have to pay a contractor to do the job. Plus, you can save on the
hiring of subs along the way.

Sometimes doing some of the work personally – Any piece of the major construction
puzzle an owner builder can tackle personally is one piece that will cost a whole lot
less. Whether it’s the roofing, framing, drywall hanging and finishing or so on, if you
have skills in any construction area, you can save yourself a bundle by doing some of
the work yourself.
Acting at the builder on your own home construction project is the best way to save a ton of
cash. It will require that you facilitate a lot of the decision making. If you’re up to the task,
you can get that concrete home of yours at a fraction of the cost the guy down the street
will pay!
Selecting The Concrete Style
Even before you get your blueprints together, you will likely need to decide what type of
concrete construction interest you. Yes, there is more than one choice!
Some of the options you will have available include:

Blocks – Concrete masonry blocks are used in this type of construction to form the
outer shell of a home. This is a standard form of building that is considered very cost
effective. Not only are block homes sturdy, they tend to be very affordable. Plus,
they offer some insulation benefits, too.

Panels – Concrete panels that are preformed to meet your building needs might cost
you more, but the outer shell can go up very fast when this is the choice.

Autoclaved aerated concrete – The appearance of this type of concrete home will be
similar to a standard block structure. This more hands-on method can cost more, but
it does have some strength and insulation benefits.
There are a host of options available when it comes to concrete homes. Select the style that
fits your ideal and your budget.
Plans Are Vital
Before you can move one step further as an owner builder, you’ll need to get your
blueprints together. Without these, you simply will not be able to hire contractors, pull
building permits or even turn a shovel of dirt. Your two options for getting your hands on
plans for the concrete home of your dreams are:

Purchasing stock plans – There are a number of companies that specialize in the
creation of stock blueprints for floor plans that range from very basic to quite
elaborate. In some cases, you might even be able to start out with stock plans and
have them altered for a more customized look. To find plans, look on the Internet for
builders or architects that offer ready-made blueprints for sale. Take the time to
review your options, check into the company’s licensing and background and pricing.
Don’t skimp too much on the plans. Everything else you do will hinge on them!

Dealing with an architect – This is an excellent way to ensure the house of your
dreams really looks like you thought it would. When you have an architect draw up
plans for you – based on your input – you call the shots in the style and appearance.
If saving money on this step is desired, shop around for architects. Compare not only
prices, but also reputations and portfolios. Remember, you’re talking about your
dream house here. This means you don’t want to shortchange yourself on the
cornerstone documents for everything else that will come.
Building a concrete home is a fantastic way to get the property of your dreams. This type of
construction is well known for its durability, flexibility and strength. If saving money on the
project is your plan, consider stepping out as the builder. You will have to do some work –
and maybe even a lot of it. In the long-run, however, you’ll keep a whole lot more than
spare change in your pocket. Need more content
How To Enjoy A Real Bargain On A Steel Frame Home
If you’re in the market for a steel frame house, you, no doubt, understand the value of
money. This type of construction can beat wood framing hands down when it comes to
strength and durability. Unfortunately, it can cost a lot on the front end to have a steel
frame house constructed. Unless you happen to have the Midas touch, chances are you’ll be
frightened away by the sticker price. You don’t have to be. If you take the right steps to
make your own golden opportunities for money savings along the way, you can have the
home of your dreams without busting your budget by mythic proportions.
While it’s true the initial materials will likely cost you more for a number of reasons when
steel construction is on tap, you can save plenty of pennies in other areas.
What Is Steel Frame Construction?
Steel frame housing is very similar to regular construction. These homes can taken on any
imaginable outer appearance you happen to desire. The inside framing materials – the 2-by4s, for example – will be made of steel rather than lumber. The advantages of steel over
wood are many, despite the elevated costs. The money invested can save you a lot down
the road because steel:

Is stronger

Doesn’t attract termites and other wood-eating pests

Tends to hold up to storms better
When the long-term advantages of steel are considered, this building material makes a lot
of sense. With today’s lumber in short supply and the quality often in question, steel is a
sound alternative.
How To Get Steel Framing
You can’t run to your local hardware store and purchase steel framing for your house by the
stick. In most cases, you have to deal directly with a manufacturer who will prepare your
order based on your house plans. You have two main options here, both can present cost
savings if you shop around. They are:

Buying in kits – Some companies that manufacturer steel framing for housing offer
nearly complete construction packages. This means they can provide you blueprints
for house construction (or alter yours for steel), offer you all the materials you need
to frame your house and cut everything so it’s ready to fit together. This option can
save you some hassle and even money in the long run if you like the plans and the
pricing is sound based on going it alone.

Buying just the steel – If you discover you can buy your other materials for strapping
and securing more reasonably as separate purchases, this option makes sense. In
most cases, you will still need to have plans in place so the steel can be pre-cut for
framing based on your blueprints.
Once you secure your steel, other options for money savings will readily present
themselves.
Getting A Plan
If you don’t choose to go the kit route with steel frame construction, you will need
blueprints from which contractors can put your home together. Aside from the kit, you have
two main choices for getting plans that will map out the home of your dreams. Both present
cost savings potential. They are:

Buying pre-made plans – Architectural firms and builders often are more than willing
to sell stock blueprints for homes. This is a great way to get the plans you need
without having to pay a fortune for an architect. If you find plans in this manner and
love them, do take the time to vet the reputation of the company you are buying
from. It doesn’t do you any good to have your blueprints arrive to find out a few
weeks down the road they are flawed.

Working with an architect – Should you want a custom design, this is your best bet.
Take the time to gain quotes and study the work of different architects before diving
into a contract. It’s also a good idea to see if your architects of choice work with
steel framing.
Steel frame construction can be costly, but it does pay off in the long run. If you want to
save money and still enjoy topnotch quality, there are steps you can take to shave dollars –
even thousands – off the final expenses. Need more content
How To Save Money On Log Homes
You’ve looked at every building style imaginable, but you keep coming back to the rustic
style and natural beauty of log homes. Your mind is made up. You want this type of house,
but your budget is tight.
Can you have your cake and eat it, too?
The answer is a simple yes if you know what financial corners to cut. You can have the log
home of your dreams without paying a small fortune in the process or even limiting quality
along the way. The tricks lie in how you handle the impending construction. If you already
own your own land on which to build, or you plan to purchase a piece to do so on, you’re a
step ahead of the game.
Once you’re in the driver’s seat as a property owner, there are lots of opportunities to cut
your costs while still building the home you have your heart set on. From saving money on
the design work to keeping money in your coffers during actual building and finishing, there
are ways to reduce the dollar amount attached to the construction of log homes.
Money Savings Is In The Design
Whether you own your own property or not, you cannot build a home without first having
blueprints in hand. It doesn’t matter if a general contractor is representing you throughout
the entire building process or you plan on going it alone, you will need blueprints to obtain
the proper government permits to begin construction.
The problem here is that hiring an architect to create blueprints for you can be a very costly
venture. Sometimes this is well worth the expense though. If, for example, you have a very
specific design and floor plan in mind, starting from scratch can be the best way to go. If
you don’t have a dream design in your heart, you can save a tidy sum by looking at
alternatives.
So, what’s the best alternative?
Chances are you can save yourself a big bundle from the start by purchasing plans that are
already prepared. There are building and architectural firms out there that specialize in
creating blueprints for log homes. These prints can be ordered online and delivered right to
your door for a fraction of the price that an architect might charge to create plans from the
ground up.
Now, before you jump at the first set of plans you see, there are things to keep in mind. If
you do want to order ready-made plans for your log home, take the time to:

Carefully review the options – There are lots of companies out there that offer blue
prints for log homes. Review the floor plans and elevations carefully. Make sure
you’re in love with a design before you jump to buy.

Research the company – Do look into the background of a company offering
blueprints and designs for any home. It doesn’t pay to plunk down even a penny if
the blueprints come up short in the local building office. You will find yourself back at
square one without a permit in hand.
Should you decide that creating drawings from scratch is the best way to go, you can still
save money on the design phase. To get the best possible pricing, take the time to obtain
quotes from architects, look at the designs and go from there. Make sure you get the plans
you really want, because every other step of the project will hinge on this decision.
Kits Can Make A Difference
If you’ve decided to search for ready-made plans for a log home, chances are you’ve
discovered that it’s possible to purchase kits that contain nearly everything needed for
construction. For a single price, you can have your plans, wood, electrical and plumbing
materials and even some of the finishing items you will need to make your house a real
home.
Now, is this the best way to go? The answer all depends on the pricing.
To make sure a kit is the cheapest, most efficient way to go, pay attention to:

The materials included – Good kits will come with all the basic building materials for
your home, plus the plans. You will likely still need to pay to have your slab laid,
your basement dug and a fireplace constructed (if you want one). If you find yourself
having to buy an undo amount of materials even with a kit, it might not be the best
option.

The price breakdown – To make sure a kit is worth the price, take the time to do
your own fact-checking. Find out what the materials are and price them out on your
own. It may be the kit is the best way to go financially. It may, however, turn out
that you can do better buying materials on your own. The only way to be sure it to
get quotes on your own.
Sweat Equity Pays Off
If you really want to save a lot of money on the construction of a log home, you’ll find
taking on some of the work yourself can pay off. No, you don’t have to do everything to
realize some serious cost savings. If you can use a hammer, screwdriver or saw, you can
save on some labor costs. If you can’t use any of those things, but you’re an expert
organizer, you’re still in luck. There are ways to take professionals out of the equation to
your financial benefit.
Here are some of the ways you can save yourself cash by getting into the construction
project yourself:

Acting as your own general contractor – If organization is your thing and you own
your land, you can cut the general contractor out of the picture entirely. Remember,
if you do choose to do this, you will have to pull your own building permits, schedule
subcontractors, arrange for material deliveries and inspections and even handle
paying people on time. Still, if you and your calendar are up to the task, this can
save you a bundle.

Pieces of the construction – If you’re an expert do-it-yourselfer, take a look at the
phases of construction. If there is a part, or even parts, you can handle alone or with
some friends, go for it. As long as your work meets the muster for inspectors, you
can put a piece of yourself into the construction and save money, too.

Final phases – Do-it-yourselfers often find themselves right at home during the final
phases of construction. Laying the tile or carpets, finishing the bathroom, putting in
cabinets or even installing the counters or appliances yourself can save you some
money.
If you want to save money on construction of your log home, bite off portions of the
construction process you can handle. Just be realistic about what you can honestly do and
what might be too much. Remember, quality should be as much a concern as saving
money.
Other Things To Consider
If you don’t want to get down and dirty in the construction process, there are still things
you can do to save yourself money. Some examples of ways to cut corners financially
without impacting your dream home in the process include:

Using the calendar wisely – Do make certain to schedule the construction of your
home during the best possible weather months. It won’t do you or your budget any
good to have your log home half way through construction when the first big
summer rains hit and bring everything to a screeching halt.

Downsize a little – Should you find your dream home is becoming too costly, look for
ways to downsize it just a little. Perhaps selecting plans for a slightly smaller home
would bring pricing in line?

Pay attention to the finishing touches – Once the logs are in place, the electricity is
on and water is coming to your home, your expenses aren’t over. It’s often in the
finishing touches that homeowners spend too much. To keep pricing low on the
aesthetics, shop around and compare pricing on such things as kitchen cabinets,
appliances, bathroom fixtures, light fixtures and so on. Scaling back even slightly can
save you thousands. Even consider shopping scratch-and-dent on some things. You’d
be surprised at how much a tiny scratch on the back of a refrigerator can save you!
Building the home of your dreams is an exciting proposition. Spending more than you have
to, however, can make your plans go up in smoke. Take the time to consider all your
options and select the cost-saving measures that make the most sense to you. Tackling
even the smallest of jobs can leave a little extra money in your pocket while still affording
you the home you’ve always wanted.
How To Save Now And Later With A Solar Home
If you’ve looked at an electric bill lately, you know the value of a solar home. There’s no
denying that building a house to maximize the potential to soak up the sun’s rays to offset
heating and cooling bills is smart. Unfortunately, tweaking a home to take full advantage of
every daylight hour and installing the correct systems to harness the power can prove very
costly. On the upside, making this investment can save you a lot of money down the road.
So, how can you save money and still get the solar house you have your heart set on?
There are ways to bring the costs of solar home construction into line and make the
investment well worth every penny. The trick lies in knowing what corners you can get away
with cutting and which ones to refuse to comprise on. When you arm yourself with the right
tips, money savings will come naturally.
Why Go Solar?
As electrical and natural gas prices continue to rise and availability of these power sources
stands in question, solar is an excellent alternative for offsetting use. In some cases, it’s
even possible to completely remove a home from a power grid.
Solar energy has come a long way since its original heyday in the 1970s. This source of
power is now more efficient to tap into and it is becoming more cost effective with each new
technological breakthrough. The benefits of using solar to augment or replace natural gas or
electric include:

Monthly cost savings – When a home-based solar power system is used to augment
electrical, monthly electric and/or gas bills can be reduced dramatically. The actual
amount will vary based on power availability and which home systems are offset by
the use of solar.

Environmental benefits – Solar energy is completely renewable. The impacts of using
this form of energy to power a home a very minimal.

Availability – Solar power units can operate when other sources of power go out. If
the electrical grid is offline, for example, power stored in solar batteries can still be
used.
Building a home that relies on solar power is an excellent way to fight back against the high
price of electricity by offsetting its use. Building this type of home will take careful planning
and consideration, but it can prove quite worth it financially in the long run.
2 Major Steps For Cost Savings
Solar construction doesn’t have to break your budget if you take the right steps to save
yourself money. There are two main things coming out of the gate that you can do to
ensure that costs stay low awhile the beauty and efficiency of your home are high. They
are:

Choosing to build on your own land – If you buy land in advance of the construction
of your solar home, you will be able to experience a number of cost-savings benefits
that might not otherwise be afforded to you.

Acting as your own builder – If you do buy land to build on, this option will become
wide open. If you act as your own builder, you can substantially cut down on
construction costs. While you will have to do a rather sizeable amount of work to see
real rewards, the impact on your bottom line can be quite sizable. As the builder,
you will have to arrange for land preparation, obtain blueprints, hire subcontractors,
order materials, obtain permits and set inspection appointments. Every step you take
on your own, however, is one piece of the puzzle you won’t have to pay a contractor
for.
Why A Land Purchase Matters
Beyond being able to act as your own general contractor, having your own land for
construction of a solar home can and does provide you with a number of other benefits –
especially for this type of home. When your piece of property is specifically picked out for
solar construction, you will be better able to:

Situate a house on the property for maximum sun exposure – This can be a very big
issue that will impact the overall efficiency of a solar system. Your home and its solar
panels should be situated for the maximum effectiveness. On small lots or in
subdivisions, you will have less freedom on this front. While this won’t mean you
can’t go solar, it can lessen the effectiveness and power output of your system.

Avoid obstructions – Things that get in the way of panels receiving the optimum
amount of sunlight can hamper the ability of systems to operate at their full
potential. When you build in a subdivision or on a very small lot, you will have little
control over where neighbors put their houses, trees and other obstructions. If you
pick out your own lot of reasonable size, however, you’ll have more control over this.
Getting Your Plans Lined Up
Before you can move forward with construction of your solar home, you’ll need to have
plans in place for the home itself and the solar electrical system. There are a few options,
but one tends to stand out if maximum efficiency is your desire.
So, what are your options?
As an owner builder, you can choose to purchase ready-made plans from an architectural
firm or professional builder. Stock plans can be purchased for a fraction of the pricing
working with an architect on a custom design might cost. If you choose to go this route, do
check into a firm’s background, licensing and effectiveness of designs. You want to hear
from others who have built solar homes from the designs about their experiences if at all
possible.
Working with an architect might be the best option going. While this will cost you more,
getting a custom design can save you money in the long-run. When you work directly with
an architect and you happen to already have your land in place, your solar home can be
designed to:

Meet your dream home specifications – A skilled and licensed architect should be
able to take your ideas for a dream house and put them on paper. This is the surefire
way to get the house you truly want.

Increase solar efficiency – When an architect who knows solar design works on your
home, it should turn out to have the maximum efficiency. A good architect will not
only take your design requests to heart, he or she will also help plan out solar panel
placement. If you have the land already purchased, he or she will also take this into
account and make sure the situation on the property is ideal for gaining as much
incoming power as possible.
Working with an architect will cost you more, but it can be worth it. Just take the time to
shop around not only by pricing, but also based on skill level, reputation, licensing and past
work.
The Real Money Savings
Okay, so far you’ve learned that cutting corners on the design can cost you over the long
haul. Bet you’re dying to learn how you can save money on the project! Remember that
suggestion to act as the owner builder? That’s where the savings comes in.
As an owner builder you will be able to save on:

General contracting fees – You can cut the entire cost of a general contractor out of
the bottom line. While this will put the onus on your shoulders, the money savings
can be very worthwhile. Just make sure you have a handle on the building process
and the time and organizational skills to pull off the job.

Some subcontractor fees – Owner builders are allowed to perform some of the
construction work themselves. This means if you’re particularly handy in any area of
construction, you can feasibly cut a subcontractor out of the picture. Whether it’s a
big piece of the puzzle, such as framing, or a small one, like painting, every job you
can tackle personally will save you.

Materials ordering – The materials costs for building a solar home can add up to a
fair amount. As the owner builder, you can do some of your own ordering. This will
give you the ability to price things out and obtain the best possible quotes. Just
make certain you don’t put pricing over quality.
Saving money on the construction of a solar home without sacrificing “dream house” status
is more than possible. If you take on some of the work yourself and learn what corners to
cut and which ones to hold firm on, your savings can add up to a tidy sum.
Saving Cash On The Construction Of Green Homes
If you’ve been researching your options for building a home that’s considered green, you
know already that this can be a very costly undertaking. Depending on how you personally
define “green,” the materials and systems required to make a house fit the description can
be quite expensive. There are steps you can take, however, that can keep costs in check
and still afford you the home of your dreams.
One of the best ways to enjoy a green home without giving up too much of your own green
in the process is to consider building it yourself from the ground up. No, this doesn’t
necessarily mean foregoing all contractors and doing all the work yourself. It can, however,
prove quite beneficial to your wallet for you to have land in place on which to build and then
to act as the owner builder on the project. This can cut some major expenses right off the
top of your home construction project and enable you to keep more money in your wallet or
put more back into the construction of your home.
What It Means To Be An Owner Builder
When you act as an owner builder, you’ll have to do a lot of the things a general contractor
would normally handle during the course of constructing your green home. This doesn’t
necessarily mean you’ll have to swing a hammer or frame a room for drywall. It does,
however, mean that you will have to take the lead on your construction project. This is not
a job for the squeamish or disorganized, but it can save you some serious cash on the
building of your home. Owner builders who completely replace a general contractor will save
on these fees right off the bat. The work involved includes, but isn’t limited to:

Getting permits – As the owner builder, you will have to make sure you have your
plans in place and that they meet code. Once you have these, you’ll have to apply
for building permits before a lick of work can begin on the building of your new
home.

Hiring subcontractors – It is typically a general contractor’s job to line up specialty
trades workers to handle different phases of construction. This might include such
trades as plumbing, electrical, masonry and so on. It will be your job to get quotes,
sign contracts and oversee work if you act as the owner builder on a project.

Making sure insurance is in place – Having the right type of coverage to protect
people and your investment during construction is important. General contractors
sometimes take care of this. As the owner builder, the burden will fall on your
shoulders.

Scheduling – You will have to schedule all phases of construction and make sure
proper inspections take place when they are supposed to.
Working as the owner builder on the construction of your green home is a big job. It is a
job, however, that can save you a bundle of money. When you call the shots, your cost
savings can be quite appreciable.
Before you dive in to building your green home, there are major considerations that you’ll
have to take into account. The first step in the project will involve defining what you mean
by green. This can directly impact not only construction, but also the bottom line.
Define Your Project
Before you can even seek out plans or have an architect draw them up, you need to define
in your mind what you mean by green. This is a rather subjective term when it comes to
building a home. In the strictest sense of the word, it would mean a house that has the
lowest possible environmental impact. Options you might want to consider for a “green”
house include such things as:

Using recycled materials – It is possible to rely on recycled materials in some areas
of home construction. This can actually save you money and might not even have an
impact on design at all.

Creating energy efficiency by design – Some people define “green” by how energy
efficient a home happens to be. This can include using structural insulated panels
during construction, making certain a home is well placed on its property to protect
against the elements and even ensuring that other insulation features go above and
beyond in their ability to function.

Building in solar energy use – When a home relies completely, or in part, on solar
energy, a green factor definitely comes into play. To make the most of solar energy,
it is wise to include it in the actual planning and design phase of construction. If an
architect, for example, knows you want to use solar, he or she can place a home on
its lot to take the fullest advantage of this type of system.

Considering water sources – Some “green” house designs call for complicated
systems to collect and reuse water. If this is to your liking, you’ll need to make sure
it’s included in the designs.
Once you have your brain around what you mean by green, you can proceed with the next
vital step in the pre-construction phase – getting your plans.
Design Is Essential In A Green Project
The options you will have available to you for getting your blueprints and plans for
construction will depend on the type of green home you have in mind. The complexity of the
project and how customized you want to go will generally be the determining factors. In
general, you have two main options. They are:

Purchasing stock plans – There are companies that specialize in the creation of stock
plans for building green homes. These plans are available for direct purchase from
architectural firms, for example. The cost associated with buying ready-made plans
are generally much lower than having custom blueprints drawn up. Just make certain
the company you choose to buy from is reputable. Check into such things as
licensing, background and experience before making the final decision to buy.

Working with an architect – If you have a specific idea in mind for what you home
should look like or how elaborate its green features should be, drawing plans from
the ground up makes sense. While an architect might cost more, this selection can
get you exactly the plans you want. To save money on this process, take the time to
get multiple quotes. Make sure your architect specializes in green construction.
Licensing and reputation should also be considerations in the final decision.
The Real Money Savings
As the owner builder on your green home project, you will be able to take advantage of a
number of money saving opportunities. Some of the things you can do to cut corners on
cost without hurting the quality of your home include:

Taking on some of the work – If you are the owner builder on your construction
project, you will be able to take on as much or as little of the actual work yourself.
If, for example, you know how to put on a roof, you can cut these labor expenses
out of your bottom line by doing the job yourself. On the small scale, you might want
to do such minor things as painting, installing flooring or even putting in your own
appliances. Any project you can take away from a subcontractor will save you
money. Just make certain you are skilled enough and have the time to handle the
job

Buying the materials – It’s worth the time to see if you can get better pricing on
materials than your subcontractors can. Call around and get multiple quotes before
making the decision. Sometimes subcontractors do offer better pricing. In some
cases, however, their markup on supplies can cut deep into your bottom line.
Depending on the materials that will go into your home, you might even be able to
get donations. Some green designs, for example, call for the use of recycled tires for
the walls. These can be donated to the project at no cost to you if you take the time
to generate a little publicity for your project.

Hosting a workshop – When green home construction is under way, it can be a
curiosity in some areas. A completely green house that relies on rain water, solar
energy, wind power and other features, for example, can be a big draw in the local
construction trade. It is possible to gain free manpower by inviting pros to learn the
process of building a new design by working on your home. This has been done in
some areas much to the benefit of homeowners.
Building a green home is a great way to save money in the future and do your part to
protect the environment. This undertaking can be costly during construction, however. To
keep costs low, you can act as the owner builder on your project and do some of the work
yourself. If your home design happens to be unique, it’s even possible to get creative in
cutting costs by hosting workshops and accepting donations toward construction. Any piece
of the project you can take on yourself will end up saving you money.
Saving Money On Smart Home Construction
If it’s your dream to one-up the Jetsons and have more technological gadgets and doodads
in your home than you can count on your fingers, there are ways to make the vision reality
without destroying your budget. Should you choose to build a smart home from the ground
up yourself, you will find money savings opportunities at every corner.
Acting as the owner builder on your project will be the best way to go to realize cost
savings. If you happen to own your own property on which to build or plan on buying some,
this option will become wide open to you. While working as the “general contractor” on your
home’s construction will take a great effort, it can afford you some incredible budgetstretching options.
Be Wise With Your Smart House Plans
Smart houses are unique designs that require a lot of technological knowhow. Since a smart
house is technically designed to have all its major systems operate automatically and for
your optimum comfort and energy savings, it is wise to consider the creation and purchase
of blueprints carefully. Typically, there are two main options at your disposal. They are:

Purchasing stock plans – As smart houses become more popular, this is an option
that is becoming available. Stock plans can save you a lot of cash over what a
custom design might cost you. The best place to start an initial search for readymade plans is the Internet. Here you can review different companies that offer plans,
review their designs and even start the process of vetting their backgrounds. Before
you decide to purchase plans, however, do take the time to fully examine a
company. Since smart houses are very unique, it is wise to make certain a company
has experience in this type of design.

Working directly with an architect – This is perhaps the best option for having a
smart house design created. When you work directly with an architect, you can have
the house of your dreams crafted room by room. Plus, you can make certain the
features of a smart home that appeal to you are included in the planning. Again, it is
imperative to vet the background of an architectural professional. Look into such
things as licensing, experience and past designs.
Once you have the plans in place for the construction of a smart home, you’ll be well on
your way. Around the corner are many opportunities for cost savings.
Get Involved Personally
Choosing to act as the organizer on your building project is only the first step in cost
savings. If you want to make sure your smart home has all the features to make it stand
out, but your budget is tight, you can get more actively involved in construction. There are
plenty of opportunities to cut bits and pieces out of the bottom line if you become more
involved in the process.
Some of the areas you can save on by taking an active role beyond organizing include:

Certain phases of construction – Owner builders are allowed in many areas of the
country to pick up pieces of the construction process and take them on personally. If
you happen to be handy in an area of construction, for example, you can tackle that
job and save yourself money. Whether this happens to be roofing, flooring, drywall
or even just painting, each and every task you can take on yourself will cut
contractor fees out of your budget. Just make sure you don’t do more than you can
actually handle. Inspectors will still need to be pleased with the structural work for
your home to be considered habitable.

Ordering – A general contractor typically does the ordering for many of the different
phases of construction. It’s also possible to rely on subcontractors to do this. If you
want to see what kinds of cost savings might be available, you can take on this role,
as well.

Amenity selection – Putting the finishing pieces into a home can prove to be a very
costly venture. If you take the reins here and do your own shopping for things like
floor tiles, light fixtures, appliances, counters and cabinets, you very likely will save
yourself a small fortune. Look for sales, seconds and even scratch and dent items to
get excellent deals on the items you need.
Building a smart home that has many of its major systems automated is a great way to
embrace technology to its fullest advantage. Saving money on the prospect is possible
without cutting corners. If you take control over the building project, you can keep your
budget in check and still obtain the house of your dreams.
2. How to save a bundle in obtaining your house plans.
Buying House Plans To Build Your Dream Home
If you’re ready to turn your dream home into reality, chances are you won’t find exactly
what you’re looking for in a subdivision. Within many master planned communities, what
you’ll find are cookie-cutter houses that look exactly like every other address on any given
street. This just won’t do when it comes to turning real wishes into bricks and mortar!
So, how can you get what you want without breaking the bank in the process? If you have
your own property to build on or can buy some, you’re half way there. The next step
involves getting the plans you need to illustrate exactly what that dream house should look
like.
Getting blueprints in hand for your dream house is one of the most essential steps in the
process. Without the right plans in place, you cannot have the house you’ve been swooning
over in your mind built before your eyes.
If you’re operating on a budget or would like to, there are ways to get plans without
needing to take out a loan in the process. You’ll find there are two main ways to make this
happen. You can choose to deal directly with an architect, or you can purchase ready-made
plans. Both cases do present you with plenty of opportunities for cost savings if you are a
savvy consumer.
Why Plans Matter
If it’s your desire to save money and still get a spectacular house, the plans will be one of
the most important tools you’ll have at your disposal for making this happen. Not only will
your blueprints put your dreams on paper, they will give you the leverage you need to:

Get building permits – Whether you hire a general contractor to do this or you plan
to go it alone to save money, you will need blueprints to get construction permits
from your local building office.

Hire contractors – General contractors and subcontractors alike will not be able to
quote you proper prices without first knowing the plans for a house. There’s no point
shopping around to save money on the pros you need to line up for construction
without the plans in place.

Order or price out materials – From your blueprints, you will be able to determine
exactly what materials are needed to construct your home. You can’t begin pricing
out materials for potential cost savings without them.
Saving money on your blueprints is possible if you take the right approach to making this
happen. Remember, we are talking about your dream home here, so don’t try to sacrifice
quality or accuracy to save a few bucks. This can end up costing your more in the end.
Working With An Architect
If you have reasonably well-developed ideas in mind for what your house should look like
and how it’s floor plan should be laid out, or if your property happens to have unique
features you want to preserve, working directly with an architect you can sit down and
discuss matters with is a smart idea. Architectural services can cost you a pretty penny, but
they can be worth every bit if you get the blueprints you want.
To get the best possible services at the lowest prices, try following these tips for hiring an
architectural firm or professional:

Shop around based on backgrounds – Before you even make an attempt to collect
quotes, it’s a good idea to narrow down firms or professionals based on their
backgrounds, experience, licensing and reputations. While you might not be able to
afford someone on Frank Lloyd Wright’s level and stay within budget, you should not
acquiesce to hire a pro that just can’t get the job done right to save some money on
this phase of the project. (Don’t worry; you can save money later on actual
construction and finishing if you have to!)

Look at portfolios – Once you narrow down a few professionals, take the time to
check into their portfolios before getting quotes. You want to find an architect whose
previous work resonates with your style if at all possible.

Now, shop for those quotes – Don’t just settle for the first firm you come across.
Take the time to obtain proper quotes and make sure you know what the prices
include. The best firms will be willing to work with your ideas to create a rendition
you love. Some even offer 3-dimensional modeling so you can “see” your home
before you finalize your plans.
Working with an architect to craft your house plans from scratch is perhaps the best way to
buy blueprints that are truly yours. This is not the only – or even the most affordable – way
to get great results.
Ready-Made Plans Can Save Money Without Cutting Out Quality
If you only have a fuzzy idea of what you want in a dream home or you just want to save a
lot of money, going with ready-made plans can be an excellent choice. There are builders
and architectural firms both that offer pre-made plans for a variety of home styles for sale
at a fraction of the cost an architect will charge for a custom design.
The Internet is perhaps the best place to turn for ready-made plans. When you visit firms’
Web sites, you can peruse what they have to offer and even begin a cursory vetting process
to make sure a company is worth doing business with.
To get the biggest bang for your money out of this avenue, take the time to:

Make sure a company is reputable – Don’t buy plans, even if they are visual epitome
of your dream home, if you haven’t vetted a company’s background. Your plans
aren’t meant to just look pretty and right, they are first and foremost the blueprint
by which your entire home will be built. Accuracy does matter. Check into a
company’s background by making sure licensing is in place. Also, check with the
Better Business Bureau, ask for recommendations and look and see if any complaints
have been filed with state regulators where a firm operates.

See if a firm will work on alterations – Many times companies that sell ready-made
plans are willing to make minor alterations (and even major ones) to give a
homeowner the plans of their dreams. This is a great way to get the home you want
with blueprint pricing that is affordable. Do expect to pay more here.

Do shop around – Even if you find the “ideal” home plans all ready to go from one
company, take the time to check others out before settling in for a buy. It could be
the very next company will have similar blueprints for a much lower price.
If it’s your intent to build your dream house from the ground up, the plans are almost as
important as the land for getting started. When you have these in hand, you open the door
on making your dreams come true. You can save some money on this step of the process if
you take the time to explore your options thoroughly.
3. What comes first the land purchase (egg) or the
construction loan (chicken)?
This Chapter is only meant for non-land owners if you own land please skip.
I get calls every single day from people wanting to build a new home but have yet to
purchase land, obtain house plans, figure out the construction costs and most importantly
have yet to submit house plans for approval and a building permit.
The phone calls I get are from individuals wanting to combine the land purchase and
construction loan into one loan. Obtaining an all in one construction loan with the purchase
of the land is possible and does happen but rarely works out, here’s why.
1. Rarely will a land seller and realtor wait around a couple of months for you to obtain
house plans, find a builder, obtain costs and submit plans to the county planning
department for approval. All of the above items are required if you want to combine the
land purchase and construction in one loan.
You only can combine the land with your construction loan if;
1. Currently own land with or without a land balance to pay off. In fact most lenders usually
require that the land is paid and combined into the construction loan. The only time the
bank will not require the payoff is if you are applying for a remodeling second.
2. If the seller and realtor are both willing to wait a couple of months or longer for you to
obtain house plans, costs and permits.
3. A friend or relative is either gifting or selling you the land and is willing to wait for you to
gather all of the above lender requirements.
4. If you are buying the land that happens to come with house plans and permits.
Banks are only willing to combine the construction loan if you are prepared to provide the
lenders requirements and are pretty much ready to start building the home.
So what’s the solution? The solution is to buy the land first either by obtaining a land loan,
owner financing or paying cash for the land. Once you own the land and everyone’s happy
now you can take your time and obtain house plans, find a builder, obtain construction
costs, submit your plans to the county building department. Then you can obtain plan
approval and a building permit. This is the time to apply for the all in one construction loan.
This is when you can combine the land loan/balance into the construction loan.
How To Buy Land For Your New Home And Save Money Along The Way
If you’ve been in the market for a new home, you know that pricing can be completely
insane. Even with the ups and downs of the economy, new homes – especially dream
homes – certainly cannot be classified as cheap. One of the best ways to get the house you
really want without paying a fortune is to build it yourself. To gain the maximum financial
savings though, you’ll need to have your own land.
Don’t worry! While this does open a can of worms, there are some economic benefits that
can go along with buying property on which to build. There are even some reasonably
simple tips and tricks you can follow to purchase a piece of land on which to build. Once you
have the land in place, the doors open wide for cost savings throughout construction.
Why Owning Land Matters
If you’re scratching your head wondering why you should purchase your own property to
build a dream house on, you only need explore the options that become available when you
do so to see why this is smart. When land is purchased outside of a subdivision and outside
of a “home/land” package, you will gain the benefits of being able to:

Select exactly where you live – Subdivisions are nice, but it seems the “choice”
pieces of property are always taken. If you want a corner lot, a wooded lot, a lot with
a view, going it alone can afford you the ability to be picky on this front. While you
might have to invest some time looking for the perfect piece of land to buy, you
won’t have to settle for buying the house on the middle of the street if you don’t
want it.

Act as your own contractor – When you own the land your house is going to be built
on, you have the legal rights to call the shots during construction. This means you
can act as your own general contractor and even do some of the labor yourself. The
end result of going this route can add up to thousands and thousands of dollars in
savings. While it does take some major work to pull off building your own home as
an owner/builder, the money saved can be extremely appreciable. Just think of all
the extras you could add into your dream home if you didn’t have to pay a general
contractor!

Choose your neighbors – When you buy your own land, you can choose to have
neighbors or not. Depending on the pricing of property in your region and your
budget, you can guarantee that your neighbors won’t be able to see through your
windows each and every morning!
The benefits of building on your own land can be extensive. Not only can this move save
you money, it can help you ensure your dream homes sits on property that suits your
vision, as well.
What To Look For In Land
If you’ve made up your mind that owning your own land makes sense, you’re on the right
track for financial savings and seeing your dreams become reality. Now, you need to decide
how much land to buy and where to purchase it from. If you’re idea is to save money on a
purchase and still grab a great parcel, you’ll want to consider these things when you’re
selecting property:

Location – Where you choose to build your home can be almost as important as the
structure you put on the property. Take the time to carefully weigh your options in
regard to location. As a general rule of thumb, waterfront property will cost you a
little more. Parcels within a town or city will also typically cost more for less land. If
you go on the outskirts of a developed area, however, bargains are often up for the
taking.

Size of the parcel – This all comes down to personal tastes and how much you relish
the idea of having neighbors on top of you. Some lots are so small that they are
measured out in feet rather than acres. Depending on the location, going very small
could save you some serious cash. Acreage, if you want it, doesn’t necessarily have
to cost a bundle. When you obtain a few acres on which to build, you will gain a little
more freedom to situate your home as you want and even enjoy a buffer between
you, neighbors and even a major roadway.

Availability of infrastructure – This can be a very big deal if cost savings is important.
If the land you buy isn’t available for hookup to sewer, water, electricity, cable or
even phone service, you could find yourself paying out through the nose to have
these services run. While you can workaround some of it by using septic and a well,
for example, some communities have banned the use of these systems. Find out
about the availability of amenities and/or the costs associated with running lines.
Even if the pipes run right in front of your property, you will have to pay to have the
services run to your home.

Zoning – The present zoning on a piece of property can be a big issue. If you want to
build a home on a piece of land, be certain the law will allow you to do so. If the
right zoning isn’t in place, do take the time to make sure zoning can be changed with
relative ease before putting on offer in on the land. Rezoning will cost you some
money, but it can be worth it if the property is your “dream.” Just do be certain the
obstacle isn’t too great.
How To Find Property Without Paying Too Much
Now that you have a relatively good idea what to look for, you need to know how to look
and keep cost savings in mind. There are ways to purchase land on which to build without
busting your bank into unrecognizable pieces. Try these options for buying without paying
too much:

Act as your own agent – Do the looking yourself and even consider properties for
sale by owner. When you go this route and the seller does too, you both cut out
agent commissions. While you might want a real estate advisor or lawyer to look
over a final deal to be safe, the actual sale can move through without extra fees
tacked on.

Consider auctions – Land auctions are a great way to purchase property without
spending a fortune. While there’s no guarantee you will win at auction, the savings
can be worth a few frustrations.

Look at foreclosures – Homeowners aren’t the only ones who deal with the threat of
foreclosure. Landowners, too, can face this dilemma. Foreclosure sales, auctions and
even pre-foreclosure short sales can net you the land you want at the price you
want.

Consider scaling back – If you have your heart set on 20 acres, but your budget says
10, consider scaling back a bit to get a great piece of property at a reasonable price.
If possible, buy in an area with land for sale on either side. It’s possible you’ll be able
to scoop it up at a later date.

Consider moving further out into the “sticks” – While you might not want an hour’s
commute to work, a 30-minute drive might save you some serious cash on a
property purchase. Generally, the more rural the area, the more reasonable the peracre price.
Other Considerations When Buying Land
Buying land can be tricky business. This is especially so if the plan is to build a dream home
on the property. To make sure you are getting a good deal, take the time to do these things
before a purchase if at all possible:

Run a title search – Your mortgage company will probably make you do this, but if
not, do it yourself. This will help you be certain your purchase will be free and clear.

Get an appraisal – This is the only way to be certain the price you are paying is really
a good deal.

Get survey/geological work completed – At least a cursory look at the property by a
survey crew and even a geological firm is a good idea to make sure you will be able
to build on the land you buy.
Buying land is the best way to save money on the construction of a dream home. Just take
the time to make certain the property you buy is really worth the price of admission and
suitable for the house you want to build.
4. Should you hire a builder, supervisor or become an
owner builder?
Do you really want to be an owner-builder? The goal of being an owner builder is mainly to
save money. Some people can save quite a bit of money if done correctly.
Possible problems when acting as owner builder are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Construction cost over runs.
The best banks with the best rates usually require a builder or management contract.
Managing contractors to finish on time or to show up for work.
Depleting your personal savings.
The need to borrow more money (happens quite a bit).
Loan extension penalties.
Being taken by unscrupulous contractors.
The need to refinance your construction loan.
Foreclosure.
I could go on and on about the horror stories I hear from Owner Builders that did not get a
construction loan and acted as their owner builder.
If you’ve never built a home before and absolutely need to act as owner builder please take
my advice and hire a reputable builder to supervise your project. By hiring a supervisor you
can build your home for a much smaller fee than the normal builder’s fee.
The builder/supervisor will help you with the cost breakdown and manage the
subcontracting on an as needed basis. If one of your contractors gets out of hand or you
need help of any kind, you can call the supervisor for assistance.
Your job is to make sure you are hiring the right people to complete your home. It can
make the difference between happiness and misery.
If I had a dollar for every person that called me wanting a construction loan
because they ran out of money while building their new home as an owner builder
I would be a wealthy man.
If you decide on hiring a builder to do everything make sure you hire a reputable builder or
supervisor with a good reputation and plenty of references.
Ask your friends if they know a good builder and when you start to hear the same name
over and over you know you've found a good one. Ask the building inspector for a list of
reputable builders.
The most important point is shop around until you find a builder with the most reputable
and honest background. If you pay a little more for an honest and reputable builder or
supervisor you will be very thankful before, during and after your home is completed.
How To Save Thousands By Becoming An Owner Builder
If you’ve decided to trade in your rental fees for a mortgage payment, good for you! The
investment in a home of your very own can be one of the soundest over the long haul that
you can possibly make. Not only will you have a place to hang your hat, but the land and
building can, and generally will, gain in value over time.
The problem you now face is going from that decision point to actually finding the home of
your dreams. If you happen to own your own land, or you plan on buying some, you will be
in the driver’s seat for enjoying some serious cost savings if you decide to build from the
ground up.
There are some major advantages that go along with from-scratch construction. First off,
you get to select your property. Secondly, you won’t be restricted in designs by the homes
offered in a cookie-cutter subdivision. The third advantage – and it’s a big one – lies in the
potential bottom line savings you can enjoy if you decide to become an owner builder.
What Is An Owner Builder?
Glad you asked! An owner builder is simply a property owner who chooses to oversee the
construction of a personal home. As a landowner (or soon-to-be-landowner), you have the
legal right to assume the role that is traditionally reserved for a general contractor. You can
also, of course, choose to work with a general contractor, but the real money savings come
in if you take the lead.
Saving Money By Forgoing A General Contractor
When you cut a general contractor out of the picture, you will find the potential for saving
money on residential construction is quite tremendous. Right off the top, you’ll be able to
subtract the fees a general contractor would be likely to charge for overseeing a building
project from beginning to end.
The potential cost savings are found in such fees as:

Total project management – When you act as the owner builder, you won’t have to
pay anyone for overseeing the work. You’ll take on this role yourself. This can add up
to thousands of dollars in savings coming right out of the gate.

Hiring subcontractors – General contractors sometimes build in fees for
subcontractor work. This means you pay the general contractor X amount for
electrical, for example, and he hires and pays the sub. Any money left over (and
there likely will be) goes to the general contractor.

Overseeing and scheduling inspections – Dealing with county or city inspectors can
generate extra charges from general contractors. When you act as the owner builder,
you’ll take these fees out of your equation.
Acting as your own general contractor can save you some serious cash. Do be prepared,
however, it will call for some major work on your part.
What You’ll Have To Do
As an owner builder, you will find yourself charged with filling a number of roles. When the
general contractor is cut out of the picture entirely, you’ll have to:

Get your own building plans – While many general contractors offer home floor plans
and blueprints as part of a package deal, if you go it alone, you’ll have to get these
yourself. Should you want a custom home or something different than everyone in
your community happens to own, this is an opportunity not a liability. To get your
own blueprints, you can order stock plans from an architectural firm or you can sit
down with an architect and have custom plans designed for you. In either case, shop
around, check into the sources and make sure you’re in love with the plans before
you make a final purchase.

Pull your own permits – As the owner builder on your property, you will be charged
with arranging for building permits and subsequent inspections. As long as your
blueprints are in order and your land is suitable for building on, this shouldn’t be a
big deal. Expect to pay some fees for permits and inspections, as well.

Schedule work – You will have to select your own subcontractors, schedule them and
pay their fees directly. This can also be more of an advantage than a liability. This
gives you the opportunity to shop around for the best quality services at the lowest
prices. The end result of careful hiring will be the work you need at pricing that can
beat what you expected to pay.

Order materials – In many cases, you will also be responsible for making sure
materials arrive on your jobsite on time. Unless materials purchases go along with
the subcontractor quotes, you’ll be on your own here. This does, again, present you
with a chance to save some serious money if you get multiple quotes and order with
care.
The job of an owner builder isn’t easy, but it can pay off financially. The more work you can
do on your own, the less you will have to pay out for your dream home.
Other Areas You Can Save Cold, Hard Cash On
Part of the beauty of being the owner builder is that you can take on actual physical roles
during the construction of your dream home. As long as you have the skills and tools in
place for the jobs you choose to tackle, getting a little dirty can save you a lot on the
bottom line.
Some areas that owner builders choose to tackle personally include:

Portions of major construction – Again, as long as your skills are high, you can take
on a major role in construction. Handling phases like framing, roofing or even drywall
can cut contractors and their fees out of your financial picture. This can work to your
benefit. Just don’t bite off more than you can possibly chew time or skill wise! Also,
do take the time to review building codes in your area. Some codes prohibit cutting
out certain trades from handling phases of construction. Electrical work, for example,
might be demanded by law to be performed by a licensed electrician.

Ordering of finish materials – When you take control of ordering your flooring,
counters, cabinets, paint, fixtures and even appliances, you can save some serious
cash. As the owner builder, you have the right to shop anywhere you want. If, for
example, you’ve found appliances at a scratch-and-dent store that suit you just fine,
you can choose to install them for major money savings.

Doing some of the finish work – Whether you’re particularly handy or not, chances
are you can take on some of the finishing work to save yourself some cash on
construction. Painting walls, putting in flooring or even hooking up appliances
personally can all add up to major savings for you.
Acting as the owner builder over your own home’s construction will involve major effort.
Don’t think it won’t. Still, if you choose to assume an active role during building, you can
save yourself thousands and get the home of your dreams in the process.
5. How does your builder determine how much your
home will cost to build?
The Estimated Cost Breakdown of your home is probably one of the most important forms in
the construction loan package. This is the breakdown of each particular cost of construction
of the home. The foundation, lumber, framing, plumbing, heating, electrical, painting, and
builder's profit, etc. Below is a typical cost breakdown that a bank or broker will provide for
you or your builder to complete.
Every lender cost breakdown is going to be a bit different and most builders will want to
provide their cost breakdown on their own form. It’s important to remember that most of
the time the lender will want the numbers on their particular form. Please note that most
lenders outsource the project and builder approval through a company called Granite Loan
Management. Granite Loan Management is a company that specializes in construction
project risk management and fund control. In other words the help the lenders make sure
that your builder is trusting, your cost breakdown numbers are accurate, the contractors are
paid properly and in a timely manner. Through their in-house fund control department,
they offer our clients web-based budget and draw status, quality inspections throughout the
United States. You can find Granite at Graniteloan.com
The builder usually completes this form to show you exactly what it will cost to build your
new home. The most important thing to remember here is that you do not want to underbid
any line item and you do not want to overbid any line item. You want accurate numbers
from real bids (not guesses) and a 5% contingency for cost overruns. Most banks add a 5%
contingency over and above the builder's contingency for added protection.
Good builders will send out the house plans to their contractors for specific bidding on each
main item or can estimate the home themselves. The builder will send one set of plans to
the foundation contractor, one set of plans to the framer, one set of plans to the plumber,
etc, etc. When all the numbers come in, the builder will fill out the cost breakdown and
come up with a total cost to build your new home.
Bad builders will use the WAG method of estimating the cost of building your new home.
The WAG method stands for "Wild A__ Guesses". This method is the most dangerous since
it can lead to under and over bidding.
The last method of bidding is simply to over inflate every single line item on the cost
breakdown. This is the most profitable method for the builder and the most expensive to the
customer.
This is why you want to find an honest, reputable builder with a good reputation in your
community. Once the cost breakdown is completed and you plan on hiring this builder to
build you new home you will need to type up a contract. The contract needs to equal the
added total of the cost breakdown.
Most builders will provide the contract but make sure you read it carefully and that you add
your requirements as well. There are two types of contracts
1. Fixed Contract: This contract is simple and straightforward. Take the total of the cost
breakdown and put that fixed number into the contract. The builder will provide a list of
responsibilities.
2. Cost plus Contract. This type of contract is usually meant for large construction loan
projects. This type of contract is utilized when the customer wants to make a lot of changes
to their home as its being built. With large homes the construction loan period to build the
home is usually 18 months so construction costs can change drastically. Builders prefer this
contract to protect the costs and profits over long periods of time.
How would you like to obtain an great estimate of what your home would or should cost to
build. Go to www.houseplans.com and look for their “Instant Cost To Build Report” and for
$4.95 to $29.95 you can buy and download a cost breakdown estimate to build your new
home. This very small fee can save you thousands. Below is a list of questions and answers
from houseplans.com of what you get.
How long does it take to get a Houseplans Cost-to-Build™ Report?
Your Cost-to-Build™ Report will be delivered instantly of completing the online order process.
Where does the home construction cost data used in these reports come from?
The construction cost data used in Houseplans Cost-to-Build Reports is compiled from real
world market information supplied by industry professionals with resulting data currently
produced for over 430 geographic and economic markets throughout the USA and Canada.
Construction cost estimating industry leader Xactware compiles and provides this data using a
team of construction analysts with over 175 years of combined experience in the construction
industry. Additional information regarding the calculated construction costs is listed below:
Calculated costs include factors for all materials, labor, and equipment needed to construct the
home according to national building codes plus any known adjustments required for seismic,
wind, frost and snow-load conditions. Cost for permit fees, general contractor overhead and
profit, and any applicable sales tax for your area are also factored into the total.
Costs are reflective of building the home on a relatively flat or gently sloping lot. Additional
costs will need to be added to account for lots which slope greater than 15 degrees.
Certain assumptions are made of the quality and quantity of specific building materials found to
be common for the type, style and size of the plan chosen. Custom additions or changes may not
be reflected in this value if they fall outside of the standard practices for this type of construction.
Costs are based upon finishes and features outlined in the plan you have chosen, and the actual
building of the home may increase or decrease these costs. We recommend a contingency
amount of 10-15% be added to address these possibilities.
Our numbers are not based on national averages, and our reports are not "canned". Each estimate
is made to order for the house plan, construction quality and postal code you choose.
What items are included in a Cost-to-Build Report?
The construction materials, labor and overhead data in our reports are very comprehensive and
include the items below. It's important to understand the quality of construction you choose can
make the resultant report vary significantly. Be sure to check out the assumptions we make for
the level of quality you choose when preparing your report.
Foundations: Concrete that is used for the footings, foundation walls, basement floor slab (if
required), garage floor slab, as well as any concrete columns that may be required for post/pier
foundations types.
Heating/AC: Includes furnace, central air conditioning unit, and all metal ductwork needed to
provide hot and cold air for the entire home. The number of furnaces and air conditioning units is
determined by the total square footage of the home.
Rough Framing: Wood framing used to build the structure of the home. This includes all walls,
floor joists, and roof trusses. It also includes any plywood sheeting used on the top of roof
trusses and floor joists, as well as outside of the exterior walls. Also includes any insulation in
the walls and ceiling.
Floor Covering: Includes any material used to cover any floor in the home. It also includes any
needed sub-flooring material and carpet pads. A standard ratio of 80% carpet and 20% Vinyl
Tile, unless the plan indicates some other material, such as stone or hardwood flooring should be
used.
Exterior Finish: The finish material that is added to the outside of the exterior walls of the
home. This can include any combination of brick, stone, stucco or siding.
Appliances: The electrical appliances typically supplied by the builder when a home is built.
This usually includes a range, dishwasher and garbage disposal. If additional appliances such as
refrigerators, freezers, microwaves, and trash compactors are chosen in the system, these will be
included as well. (They are not usually selected.)
Windows: Windows for the home, including any specialty, accent or transom windows, as well
as mirrors that are normally installed in the bathrooms. The material for the window frame varies
depending on the size and quality of the home, from aluminum to high-grade wood horizontal
sliding windows. Currently, the system does not use high energy, or insulation windows in the
calculations.
Interior Finish: Anything that covers the wooden structure of the walls and ceilings, and brings
the interior of the home to a finished state. This includes all sheetrock, drywall finishes and
paint. Kitchen and bathroom cabinets are also included in this section. 100% paint finish is
selected for all walls and ceilings.
Roofing: The material that is installed on top of the plywood sheeting above the roof trusses.
This is usually some form of shingles, but could be metal panels, copper and gravel style roofs.
Electrical: All electrical options for the home. This includes rough wiring that is installed prior
to any finish, all outlet and lighting fixtures and the main connections from the available power
source to the home.
Plumbing: All plumbing options for the home. This includes all rough plumbing installed prior
to any finish, plumbing fixtures for the bathroom, kitchen, and utility rooms, a water heater
typical for the home, and the main connection of the water and sewer lines.
Special Features: These options are selected by default depending on the size and quality of the
home. They include the following: Water Softener, Central Vacuum System, Fire and/or Burglar
Alarms Systems, Intercom Systems, Programmable Lighting, Home Management Systems, Fire
Sprinkler Systems and Solar Panels, swimming pools, hot tubs, fountains, and home theater
systems that would be included in this category.
What items are not included in a Cost-to-Build Report?
Houseplans Cost-to-Build Reports do not include:
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Site preparation of any kind
Removal of existing structures
Purchase of the lot
Preparation of the lot
Flatwork (like driveways
Detached garages or other structures
Landscaping
Modifications/customizations to the house plan
What is included in "Permits" and "Fees"?
Permits cost is an amount added to Cost-to-Build's total estimate to cover building permits
typically assessed by local governments for residential construction. A flat fee of $500 is added
by default. Permit costs can be lower or higher than this depending on your local government's
assessment.
Fees are added to cover the cost of any work associated with local home design compliance and
structural engineering. We add 3% to the total estimate for this. These fees can be lower or
higher than this depending on the specific issue.
What does "Overhead and Profit" include?
Overhead expenses are those costs incurred by the builder or general contractor to operate their
business, but are not attributable to any one specific job. We add 10% to cover contractor
overhead. Overhead costs can vary significantly from contractor to contractor. Some examples of
overhead costs are general and administrative expenses, office rent, utilities, office supplies,
salaries for office personnel, depreciation on office equipment, licenses, and advertising.
Profit is formally defined as the excess of the selling price of goods over cost. Profit is typically
added to the cost of a construction-related job to allow the home builder performing the work to
grow their company through reinvestment. We add 10% to cover contractor profit. Profit can
vary significantly from contractor to contractor.
You can take the above estimate and then start shopping local builders in your area and compare
prices.
6. Obtaining your building permit and when is it required?
How To Obtain A Building Permit To Build Your New Home
If you’re like most people, you’re pinching your pennies more tightly these days. That
means if you’re getting ready to have a house built, you’re looking for ways to stretch every
dollar in your budget. Building your dream home on your property is a great way to go, but
your project won’t get off the ground unless you have the proper permits in place.
There are very specific things you need to have in place before you can hope to get your
local building department to issue the proper permits. The process of getting permits and
clearances begins shortly after you buy your land to build on and doesn’t end until you
receive a certificate of occupancy (or your final inspection).
Obtaining Permits as An Owner Builder?
When you’re having a home built, you have two options for making it happen. You can hire
a general contractor to oversee the entire project and pull the permits. You can also choose
to act as an owner builder in most locations. The latter means that you will be personally
responsible for organizing an entire home construction project, pulling permits, lining up
subcontractors, ordering materials and so on.
While acting as an owner builder does demand a tremendous amount of work, this can be
the best path to take if cost-savings are desired on a construction project. You can save a
ton of money by assuming some of the responsibility yourself. The fact is the second you
cut out a general contractor and even some of the subs, your cost savings can climb into
the thousands. This means you’ll have more money to spend on making your dream house
a one of a kind!
To see your home’s project through from beginning to end, you’re going to need to follow
some basic steps. The first place to start is in getting the land.
The Chicken Or The Egg?
When it comes to getting a building permit, there is no question what must come first.
Unlike the chicken or the egg question, this one is easy! You have to have the land in place
to even stand a chance to obtain a building permit. If you plan on being a building a home,
owning the land will give you the right to request permitting approval for home
construction. Unless this essential piece of the puzzle is in place, your local building office
will not issue a permit.
Getting Your Plans Lined Up
With the land in place, your pre-permitting work begins. The next thing you’ll need before
you can march into the building office and proudly proclaim your intent to obtain a permit to
have your dream home constructed is the plans. If you’re going to be the owner builder on
the project, you have two main choices for getting your blueprints. They are:

Buying ready-made plans – You can purchase floor plans and full blueprints for startto-finish construction from architectural firms and some builders. The best place to
locate plans that are ready to go is the Internet. Here you will be able to peruse
plans, checking out different styles and see what pricing will cost you from different
companies. If saving a lot of money is your desire, this is an excellent way to go. Do
take the time to vet the company you’re considering buying plans from. It won’t do
you a lick of good to request a building permit for blueprints that are flawed! Also, if
you want some customization done, do see if the firm you’re dealing with will handle
it. Many are willing to slightly alter their stock plans (for a price).

Working with an architect – While this will not be your cheapest option for getting
plans, it can be your best if you have a very specific idea in mind for your home. To
save a little money on a custom design, get quotes from multiple architects, look at
their work and check into their backgrounds. Go with the best professional at the
most reasonable price.
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Another great option is to hire a draftsman to create your house plans. This route is
often overlooked and you can obtain local and personal service without the higher
cost of hiring an architect. To find a draftsman you simply want to look up draftsman
in the yellow pages for your area. This route can usually save you quite a bit of
money.
What’s Next?
OK, so you have your land lined up and your plans in place. You’re ready to go get that
permit. Not so fast!
Chances are you will still need to have a few things taken care of first. Depending on where
you live and the requirements placed on building, you might need to take care of these
things before a permit for building will be issued:

Surveying – It is possible you will need a survey report to present along with your
blueprints and application for permitting.
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Soil reports – These are sometimes needed when construction will involve the
installation of a well and septic system. Geological reports might also be required in
some areas.

Approvals from other agencies – In some jurisdictions, for example, you might need
approval from the water management district to build. Check with your local building
office to see what you might need in the pre-permitting stage.
Getting Your Permits
Whew! You’ve finally made it to the home stretch. To actually obtain your permits for
construction, you will likely need to:

File an application – You will have to fill out a lot of forms to back up your request for
a building permit. Along with these forms, you will need to submit your building
plans, reports and even approvals from other agencies.
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Pay fees – Building permits do not come free. The plan check approval fees will need
to be paid upfront and the actual building permits can be paid from the construction
loan if needed.
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Show licensing – If you act an owner builder you won’t have a contractor’s license to
build, your community’s codes might call for licensed professionals to handle such
things as the electrical or plumbing. If this is the case, have the information available
from the pros you’ve lined up for jobs you don’t want to tackle (or can’t because of
legal requirements).

Answer any questions that may arise – During the permitting phase, it is possible for
questions about your site, plans and intent for outlying areas on the property to
come up. Site clearing and tree removal, for example, can be big issues in some
areas. So can water-related issues.
Getting a building permit to make your dream home a reality will require having all your
ducks in a row. Chances are you might even need multiple permits for different phases of
the project. Take your time, make sure you understand what is needed, ask as many
questions as you need to, and forge ahead. You can save yourself a major amount of money
by doing some of the work yourself. When you’re kicking back and enjoying your new
house, the work will be worth every second involved!
7. Should you go directly to your local bank or to a loan
broker for your loan?
Most banks offer loans, and going to them is like shopping at a Ford dealer. The only thing you
can get at the Ford dealer is a Ford. But what if you want choices?
One way to get different choices is to go shopping to every bank in town but with the advent of
the Internet who doing that anymore? Or you can call an experienced construction loan broker
who has done all of your homework for you and has direct access to hundreds of banks
nationwide. Because you invested in this e-book I’m going to provide you with the main
construction loan players in the industry at this point in time. Also because you were wise
enough to purchase this e-book you will receive all updated versions. So if a new lender comes
into the construction loan game you will know about it.
A broker is a representative for hundreds of banks. Although the broker serves as middle-man,
his or her services will not cost you anything extra. That's because brokers obtain loans at
through wholesale channels, and provide their clients the loan at retail prices, just like any
other business. If you walk directly into a bank that provides construction loan financing the
loan is already adjusted at retail pricing.
The difference between wholesale and retail is how brokers make money. Therefore, you get the
same rate from a broker as if you went directly to the lender yourself.
In Fact, because of their volume, many brokers are able to offer their clients better rates and fees
than you can get by going to a bank directly.
Did you know most banks charge the exact same fees that brokers do by building the fees into
the interest rate? This means the rate has been increased in exchange for the reduction in fees.
Bottom line is there in no free lunch anywhere so you want to focus on obtaining the best lunch
you can get for your money.
It’s amazing how often prospects want to know which lenders/banks I broker to so that they can
go directly to bank and “cut out the middleman” me. This is probably the biggest misconception
in our industry. The misconception is simply due to the fact that banks do not have to disclose
their profit or yield spread premium. Brokers by lending regulation have to show you their profit
or yield spread premium. How ironic is that? Banks are supposed to be the authority and honest
institutions yet do not have to disclose what they are making off of your loan. Brokers which can
have good and bad reputations have to show you exactly what they are making on every loan.
So the only true way to decipher your rates and fees is to compare the interest rate and annual
percentage rate that you are offered. But keep in mind that a good faith estimate is just that, an
estimate. Most loan officers will only show you the lowest most recent rate knowing that until
the rate is locked that their quote can be changed higher at a later time and date. So remember to
keep your guard up until the interest rate is locked in.
Another good thing about working with a broker is that they can charge whatever you negotiate.
I once traded a set of Callaway golf clubs with an executive of Callaway and if you went directly
to the bank they would have told you to hit the road. By the way my client also provided 4 dozen
golf balls and a Callaway golf bag.
With an experienced construction loan broker you can shop dozens of the most competitive
banks nationwide, work with wholesale pricing and can negotiate on rates and pricing.
To prove it to you please send me a copy of any quote/good faith estimate from any lender and I
will pick it apart for you. I will show you how the loan officer and bank is getting paid.
Now the good thing about working directly with a bank is that usually with local underwriting
the loan process can sometimes be much faster. The loan process is usually a 45 day process
compared to a 30 day process with some banking institutions. Focus on comparing what most
important to you and your needs and you should fine.
8. What experience does your construction loan officer
have and does it matter?
When it comes to money it’s amazing how fast any loan officer becomes an instant expert at
construction loans. You must keep in mind that all loan officers are salespeople. Yes, I know
they have fancy titles like loan officer or vice president but the title is nothing but a fancy name
for salesperson.
Salespeople usually have one main goal in mind when helping you with your loan request and
that is their commission. By the way, the fancy name for commission in the loan business is
called a loan fee, origination fee, broker fee, points or yield spread premium (YSP). But no
matter what you call it it’s still a commission. Whether you go directly to a bank or utilize the
services of a broker the name of the commission is usually called one of the above.
Now don't get me wrong, there are a lot of good honest sales people (loan officers) that work
very hard at providing you the best service and rates. What’s important is distinguishing the good
from the bad.
The following questions allow you to quickly find out if your loan officer is experienced
at construction loans.
1. How long have you been doing construction loans? 5 years or more is best.
2. What is the cash equity required for construction loans? This is the amount of cash equity
or down payment needed to qualify for the construction loan. Cash equity requirements
can range anywhere from 5 to 20%. Cash equity within a construction loan is usually in
the form of pre-pays such as down payments on the land purchase, if land is paid than the
land is the equity. All costs paid in advance such as house plans and permits are
considered cash equity, etc.
3. What is better? The voucher or draw disbursement system and why? Draw is now the
most popular because the customer has the control of the money and the builder can take
as many draws as possible assuming the particular line item on the cost breakdown is
completed.
4. Does the bank require a contingency and an interest reserve account? This is a choice but
most banks automatically add both to the loan amount.
I will explain the above questions in more detail throughout this e-book.
If the loan officer (sales person) can answer these questions with no problem then they have
passed a pretty good litmus test. But the best and most important indicator is how helpful the
loan officer is. Is the loan officer more interested in helping you obtain the best construction
loan? Or is the loan officer more interested in helping you obtain the most profitable loan for
their sake.
If you really want to throw a curve at them, ask the loan officer if they have ever built a home
themselves and what type of construction loan did they get.
If you find a loan officer that has gone through the experience of building a home themselves
then the odds are you have found an experienced loan officer. There is no better experience than
actual experience. A loan officer with no actual home building experience is like a car
salesperson that has never driven a car.
Now if you don’t think loan officers will pretend to be a construction loan expert overnight let
me give you a few more tips for you to quickly distinguish the good from the bad. First of all it’s
vitally important to realize that construction loans are the most time consuming and most
difficult loans to provide in the entire residential lending world. The loans cannot be compared to
a simple purchase home loan, refinance or equity line of credit type of loan.
Those simple loans are pretty much no brainer loans. The only problems you run into with those
loans are usually only qualifying issues. Construction loans on the other hand is a loan based on
quite a few details such as customer approval, builder approval, project approval, cost break
downs, pre-pays, permits, house plans, construction appraisals, and I literally could go on and on.
With that being said it’s vitally important for you to work with an experienced construction loan
officer. I get calls all the time from frustrated families asking for me to help them because their
loan officer are trying to learn the construction loan process on them. Let me tell you that over
and above the many details in obtaining a construction loan you do not need to their guinea pig.
Last but not least do not make the mistake of hiring a jack of all trades to provide you a
construction loan. If the loan does not specialize in construction loans move on. Also do not
make the biggest mistake of all which is going with the loan officer with the lowest fees. If you
go with the lowest fees in obtaining your loan most likely you will receive the worst service. The
old theory you get what you pay for is the same theory in all industries. Now that does not meant
to pay the highest either. Be smart hire the most qualifies and a fair price and you will have a
great loan experience. If you do not listen to me do not call me and cry on my shoulder…
9. Finding the construction loan and what are your
choices.
Below are the various ways lenders/banks offer construction loans. It is very
important to note that construction loans are very different than conventional
home loans in that there is a construction period at the start of the loan, usually
between (6 and 18 months).
The reason that understanding this important part of the construction loan (build
time) is because there is always a cost to the lender/bank for providing this phase
of the loan along with the rate lock. This cost assuming if you want to lock your
long term rate upfront will be passed onto you, the consumer, in one way or
another.
Below are the various types of construction loans.
Lock into today’s interest rate upfront construction loans; some lenders/banks can
offer you today’s construction loan rates upfront. This loan in my opinion is the best way to
go. Sort of like the infomercial, “set it and forget”. The rate during the construction period is
going to be the same interest rate (or close it) into the permanent part of the loan. An
example would work like this. Let’s say you wanted a thirty year construction to perm loan.
The first 12 or 18 months would be the construction loan period and once the home is
completed this loan would automatically convert into the permanent part of the loan at the
same rate you locked into upfront. If rates go through the roof you will not have to worry
because you would have locked in your interest rate in advance. The cost for locking the
interest rate upfront can range in the form of higher lock in rates, fees or a combination of
both. Some lenders utilize both the lock in upfront program and the Prime Rate for the
construction loan part of the loan which can be a very good thing if interest rates are low.
Currently they are low so look out for this feature. Last but not least most construction
loans have a float down feature so even if you lock your interest rate in upfront you can still
take advantage of the better rates if they improve during construction or upon completion
of construction.
The Prime Rate adjustable construction loan, Some lenders/banks offer an adjustable
Prime Rate based construction loan while building. This is actually a great way to go if the
prime rate is low or heading downward. Another advantage is that most lenders will provide
up to a percentage point below prime since the lender does not have to worry about the
cost of locking in the rate a year in advance. So for example the lender will offer anywhere
from a half of a point to 1 point below the prime rate during construction. There are two
reasons you would want this type of construction loan.
1. If rates are expected to improve over the next year or
2. If the prime rate is currently low or expected to go lower.
Currently both conditions are expected for the next 12 months into the year end of 2009.
So this is currently the best construction loan to obtain versus locking in the long term
interest rate upfront. I must say that in today’s crazy financial marketplace conforming
loans (loan amounts below 650k) you may want to still consider locking in the long term
rate upfront since these rates in particular are very good.
The 12 month construction only loan, some banks offer a 6 to 12 month construction
only loan and you will need to refinance this construction loan once the home is completed.
This type of construction loan is offered to people planning on paying off the construction
loan once the home is completed with their own source. This construction only loan can be
great when interest rates are high and are projected to go down a year from now when the
home is completed. Remember if you need to refinance you will end up paying 2 sets of
closing costs. If you have your own refinancing program with low fees and great terms this
should of no concern to you.
The short term owner builder and speculation construction loan (6 to 12 months)
Due to the amount of lenders that have gone out of business over the last year it’s not
always easy to find a lender that offers construction loans for owner builders. I have
provided a couple to owner builder lenders in this e-book that provides construction loans if
you have basic lending requirements. This type of lenders offers true owner builder,
speculation and stated income construction loans. With today’s credit lending crunch I’ve
noticed that these types of lenders now want to see the basic lending requirements such as
average to good credit scores or better. Due to the new lending world these lenders now
want to make sure that you will be able to obtain an end loan. These lenders now are
making sure you have low to moderate debt, a good amount of liquid assets, land equity or
land paid in full and the application needs to make financial sense.
The speculation, investor or commercial construction loan, Some lenders provide
construction loans to investors or speculators. If you are a builder and want to build on
speculation (sell for profit) you will need to put together a pro forma along with a loan
application from each investor and builder along with a description of the project in order to
apply.
If you’re an experienced builder and want to build a home to sell, banks will look at your
project a little bit closer. The reason is because if you’re planning on building a home or
homes to sell the lender will want to make sure that will not be a problem. This is called
speculation. Speculation is exactly what the word implies, you're speculating that when the
home is complete you will sell it and make a profit.
The problems that can occur are many, such as when the home is completed will someone
buy it or will it sit on the market. To insure the home sells the builder needs to make sure
all the costs stay in line and the house is what the public desires. Other concerns are
location, size of home, design, price, economy etc. So banks want only experienced builders
with a speculation track record, excellent credit, assets and cash equity in the project such
as paid land. If you want to apply for a speculation loan be prepared to have:
1.
2.
3.
4.
Experience at building and selling with a track record.
Description of the project to include all costs, equity, pre-pays and profit expected.
Loan application.
Good credit.
The most important thing when searching for a good construction loan is to find an
experienced construction loan specialist that knows which banks offer the best loans to fit
your exact needs.
Today's construction loan choices include the 30 year fixed, 15 year fixed, 1 year ARM, 3/1
ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM and don’t forget the popular interest only loans.
By the way, whenever you see 3/1. 5/1, 7/1, 10/1 it just simply means the first part of the
equation is for a fixed period of time. So a 5/1 ARM is fixed for 5 years and then converts to
the adjustable after the 5th year for the balance of the 30 year period.
The most popular construction loan today is the "One Time Close" but not all are created
equal. Just like any product there are the best loans, good loans and downright bad loans.
With today's technology you now have the ability to obtain a construction loan from the best
banks in the country and sign your loan documents at your local title company or escrow
office. This benefit allows you to have the most competitive construction loan available.
The graph below shows the type of loan you should apply for depending on your needs.
10. All banks have access to the same rates and the only
reason everyone ends up with a different rate at closing is
directly related to how much your loan officer and bank has
profited. (You should probably read that one again).
Your loan officer gets paid like all sales people either by:
1. Salary plus commission or,
2. Commission only.
It doesn't matter if you walk directly into a bank or work with a broker, basically everyone
gets paid the same.
If you walk directly into a bank the loan officer most likely gets a basic salary and a
percentage of the loan origination fee (points and yield spread premiums). If you work with
a broker the broker usually works on a straight commission (points and yield spread
premiums).
It always amazes me when I see TV commercials or hear radio commercials advertising
$395, zero closing costs. I always wonder if people understand how they can do that.
Ok, here is how it is done.
The inside secret is that in exchange for these low or zero closing costs the lenders will
make their profits and cover the costs of the loan by charging you a higher interest rate.
This higher interest rate pays what they call in our industry a (YSP) yield spread premium.
By charging you a higher interest rate over the life of the loan the bank can easily afford the
commercials, commissions, payroll, and cover the costs of the loan while still making a
profit.
Notice the chart below. The chart is what loan officer’s use (rate sheet) to determine the
amount of profit or commission they will try and make off of you.
The type of product in this example is a 30 year fixed loan below $417,000 (conforming).
The base rates are the rates I can offer the consumer depending in my sales ability. The
price is either a cost to you or a profit to me.
Now, look at the chart and notice the numbers in the brackets. This is how the loan officer
can make a bundle. If your loan officer sells you a 30 year fixed rate at 7.125% your loan
officer would make an additional 2.968% points (yield spread premium).
2.968% points on a $417,000 dollar loan is $12,376.56 dollars and that’s just the backend
profits. If the loan officer also charges you an upfront origination fee or broker fee (points)
they can make an additional 1 or 2 points ($4000 to $8,000).
So the next time you see advertising with no closing costs you will know exactly how they
are doing it.
So please remember that there is no such thing as a free lunch in any business. Business
wouldn't be business if there were no profits. The most important thing is that you want the
best loan available at a fair price/fee with an experienced construction loan officer that will
look out for you and provide you with excellent service for their fee.
The best way to insure that you get the best interest rate on any loan that you ever apply
for is to pay down the rate. Ok I know that sounds like a oxymoron but if you pay down the
interest rate you eliminate any back end hidden profit called yield spread premium. Notice
in the above chart the 5.875% interest rate has a cost of 0.757% to you the customer. If
you want that great rate it will cost you 0.757% of the loan amount as a fee. But you win
with the best interest rate available and your loan officer did not receive hidden
commissions.
If you just wanted the best rate on the above rate sheet without paying hidden commission
and without paying too much in fees your rate would closer to 6.000% which is what we call
par pricing.
Ask for par pricing and that will be your best rate for that day’s rate sheet. The best way to
find par pricing is to look for the 3 zero’s (000’s) on the rate sheet or closest number to
(000). Loan officers are not allowed to hand customers the rate sheet but call me and I will
send you a good faith estimate with par pricing.
11. Which banks are currently providing the best construction
loans.
Ok so this is the chapter that everyone wants to read. This is the chapter that I expose the most
current lenders that are providing construction loans on a nationwide basis. These are the lenders
with the best construction loan programs and rates. These are the current lenders that provide
owner builder loans and speculation loans.
Keep in mind that just a year ago in 2007 there were quite a few lenders that provided
construction loans but have either gone out of business or have eliminated the wholesale
channels for brokers. Some of the lenders that have either bit the dust or have temporarily shut
down their construction loan departments are Indy Mac Bank, Flagstar, Washington Mutual,
Chase, First Horizon, National City Bank just to name a few.
So it’s important to remember that there are plenty of banks willing to lend money for
mortgages, refinancing, home equity loans and every other type of loan. But if you're planning
on building a new home, where can you obtain the best construction loan with the most
competitive rates and pricing?
More importantly what are the characteristics of a good construction loan?
The next time you have some spare time, pull out the yellow pages and start calling your local
banks and ask for the construction loan department or a construction loan officer.
99.9% of the time the person on the other end of the phone (assuming you actually get a human
being) will rarely be able to direct you. If you do find a bank that provides construction loans,
they usually will only offer one product line that may or may not be competitive in today's
marketplace.
The following lenders are still providing construction loans in today’s current market place.
Please note that some of these lenders may discontinue providing construction loans at any time
and I will update the list when changes are made. Also its important to note that some lenders are
expected to come back into the game in 2009 and I will update that news as well.
1. Wells Fargo (Construction Loans) is currently providing construction loans on a retail level
and you would need to walk into a retail branch in your area to obtain a construction loan.
2. Chase (Construction Loans) is currently providing construction loans on a retail level and you
would need to walk into a retail branch in your area to obtain a construction loan.
3. Bank Of America (Conforming Construction Loans) is currently providing construction loans
on a retail level and you would need to walk into a retail branch in your area to obtain a
construction loan.
4. US Bank (Construction Loans and land Loans) is currently providing construction loans on a
retail level and you would need to walk into a retail branch in your area to obtain a construction
loan.
5. loantobuild.com (Owner Builder Loans) This lender is based in Michigan and specializes in
owner builder construction loans. The provide construction loans in specific states so you want
to go to the website at loantobuild.com to obtain the latest list.
6. First Guaranty Mortgage (Modular and Manufacturing) This lender is specializing in
construction loans if you are planning on building a modular or manufacturing home. The
provide a one time close construction loan.
7. Normandy (All Construction Loans) provides “supposedly” quite a few different types of
construction loans according to their website but when you call direct they seem to offer very
few choices. This again may change and the marketplace continues to improve.
8. Sun Trust (Southern States) provides a great one time close construction loan if you live in the
southern states from North Carolina to Florida.
9. Bismark Mortgage (Builder, Owner Builder and Speculation Loans) is currently back in
business through their wholesale channel meaning you will need to go through a loan broker in
your area or call me and I can help you at nationwideconstructionloans.com This lender provided
loans in most states but currently has a maximum loan limit of around $500,000.
12. Qualifying for your construction loan, exactly how is
it done?
The first thing your loan officer wants to see is your completed loan application. The loan
application also called the (ten o three - 1003) will tell a story of your entire financial picture.
The completed loan application will tell the loan officer many things such as,
1. What type of loan you want.
2. How much money you need.
3. Where you currently live.
4. If you rent or own.
5. Your social security number.
6. Your current employers.
7. A list of all your assets (money) and liabilities (bills).
8. How much money you make.
9. How much real estate you own.
10. Some declarations along with some government questions.
Once the loan officer has your loan application in hand they can determine whether you can
qualify for a loan.
One of the first items pulled in this determination is your credit report. The credit report is going
to tell 3 main important things.
1. Show your current credit score. The credit score can range from 500 to 800 but lenders only
want the credit scores that range from 680 to 800.
2. Show a complete list of all your monthly liabilities (bills).
3. Show all past credit problems including bankruptcies, foreclosures and late payments.
With this information the loan officer will do an analysis to determine if you can qualify for the
loan amount that you’re looking for. This analysis determines a ratio called the (income to debt
ratio) and depending on the banks underwriting guidelines this ratio will usually range from 36%
to 45%.
The income to debt ratio is the percentage of monthly debt payments (including your new
mortgage payment, taxes and insurance). This ratio should not exceed 36% to 45% of your
monthly income. Some banks will allow you to exceed this ratio if you have an excellent credit
history and excellent credit score.
The once popular method of qualifying for a loan was the “Stated Income” loan. The stated
income loan was and is still available but in order to qualify your financial application needs to
make perfect sense. Stated income allows you to qualify without verifying your income on your
tax returns, W 2's or pay stubs.
Now that foreclosures are on the rise due to loans like the stated income loans banks are taking
extra strides in making sure the stated income applications makes sense. One way to make sure
stated income makes sense is to cross reference the income with how much cash is sitting in your
bank accounts. Another way is to raise the rates and fees to discourage stated income loans and
the last way is to verify the income range on salary.com for the income stated on the application.
13. Understanding the good faith estimate and how not
to be taken by the oldest trick in the book "Bait and
Switch"?
The mortgage lending business is notorious for baiting and switching. Baiting and
Switching is when a loan officer or advertisement offers you one thing and then tries to sells
you something else.
Typical signs of baiting and switching are obvious, some basic examples are:
1. Over the phone, you are offered a much lower rate than any other quote and once you've
sent in your application the rate you were quoted has all of a sudden vanished.
2. You are offered a construction loan with no points and no loan fees. What you are not
told is that you are paying for it with a higher interest rate and the costs are built into the
loan.
3. You are told that you will not have any payments while you're building. What you're not
told is that all construction loans have this option and it's called "interest reserves" and the
payments are added to the loan amount.
Remember three important facts and you will always be in good shape.
1. If it sounds too good to be true there's usually a very good reason.
2. Always get your quote in writing, (ask for a good faith estimate).
3. If you are satisfied with the rate and construction loan program that you are quoted, ask
if it’s currently better to lock it in upfront for float.
On the flipside of bait and switching, it is very important to realize that most loan products
typically go hand in hand with banking guidelines. These guidelines are provided to loan
officers to coincide with the customer's qualifications.
For example, if you have an excellent (FICO) credit score with land free and clear, you have
more loan options available to you than the person with a poor (FICO) score, low assets and
no land equity.
14. How does the construction loan process work by
looking at the big picture?
The big picture is meant to give you a bird’s eye view of the entire beginning to end of a
construction loan. The following chapter is to provide the details.
In order to apply for a construction loans you need.
1. Land, house plans and an idea of your maximum loan amount. This is the basics of
what you will need to get the ball going. You may want to obtain a pre-qualification
for a estimated loan amount to make sure what you can afford.
2. A contractor to provide you an estimate of construction costs. You can ask 3
contractors to give you a quote to make sure the numbers are accurate.
3. A pre-qualification from a lender. Pre-qualification can either be obtained by a local
loan officer at a local bank or broker.
4. House plan approved by your city or county. You will need to obtain house plans and
as recommended you can obtain a house plan and estimated costs at
houseplans.com
5. Complete a loan application package for full construction loan approval. This is a
complete loan application to include a builder application and a project cost
breakdown etc. You can obtain this from the lender or broker of your choice.
6. Obtain a building permit either before or after loan approval. You do not need to
have a building permit in order to apply for a construction loan. Building permits can
be obtained once you have closed on your construction loan and you can obtain the
funds to pay for the permit from the loan. Make sure you put the funds needed for
the permit on the cost breakdown.
7. Your lender or loan officer will need to open up escrow and request a new title
report. If you live in an a attorney closing state you will need to hire a closing
attorney. Your lender or loan broker will open up title.
8. You will need to determine what the finished value of your home is going to be as if
it were completed. Your lender or loan officer will need to order the appraisal.
9. You will need to comply with the loan conditions that your lenders wants in order to
close the loan. Typical items are updated bank statements, land ownership
documents, tax returns, paystubs, w’2s and or whatever the bank wants in order to
make sure the loan is a sound loan.
10. Last but not least you will go to a loan closing and sign the loan documents so that
you can obtain the funds to build your dream home.
That’s it, that’s the big picture. I did this so you can visualize the process and not put you to
sleep with the important details of the entire process. In the next chapter I will get into the
details of the whole construction loan process.
15. Construction loans are actually three loans in one
and how to fill out the construction loan package
properly, (Borrower, Project and Builder).
The loan package for a construction loan consists of 3 main sets of documents.
1. Customer/new home owner package consists of the loan application, financial
documents such as tax returns, paystubs, w’2s, bank statements, retirement asset
statements, liabilities/debts, and real estate.
2. Builder package consists of builder application, general liability insurance, builder
license, cost breakdown, and a signed contract matching the cost breakdown.
3. Project package consists of house plans, land ownership documents, appraisal, title
insurance, escrow account, plan approval and or permits, outside contracts and any
other important documents pertaining to the project.
The customer package is completed by you the new home owner. The builder package is
usually handled by the customer with the builders help and the project package is put
together by the customer and the loan officer. An experienced loan officer will provide the
packages in a step by step manor. If you notice the package is one big pile of paper without
a cover sheet explaining what is needed that’s a good sign the loan officer is not detailed or
experienced. The loan package should consist of 2 packages.
1. Pre-qualification package to include the loan application and short list requesting just
the basic income qualifying items such as the loan application, tax returns etc. These
items are meant to determine which lender you qualify for and upon qualification the
complete package will be sent out at that time.
2. You are qualified for a particular lender and that is when the complete construction
loan application package is sent out to include the builder package and project
paperwork to be completed. Also a list of items that need to be ordered such as the
appraisal and the opening of title and escrow.
16. Should you lock in your construction loan before
you start building or let the interest rate float?
If the rates are heading upward, lock. If the rates are stable, relax. If the rates are headed
downward, float. I think the most important thing to remember when you are actually applying
for a construction loan is that interest rates usually do not fluctuate too much during the loan
process. The average time is takes from beginning to the close of a construction loan is a 30 to 45
days process.
When applying for a construction loan, focus on the entire package including the direction of the
financial markets. For example the prime rate is currently heading downward so the prime rate
construction loans are a better program currently.
Over the last few years interest rates were at an all time low and have continued to go up in 2006
and 2007. If you’ve been watching the financial news in the latter half of 2007, you most likely
noticed that the fed raised the interest rates to a point that almost shut down the markets. That
was only half of the story, what actually was happening was all the easy, stated income financing
was finally catching up to the families that bought a home with a short term low interest rate and
when the rates started going up these same families could no longer afford their mortgage
payment. Everyone wants to blame the sub-prime market and higher interest rates but no one is
focusing on what the real problem was and that is all of the following variables, easy money,
easy financing, liberal underwriting guidelines, consumers applying for loan programs with out
factoring in rising interest rates and loan officers selling programs without helping the customer
think ahead.
Inexperienced loan officers will usually offer their customers an adjustable rate during
construction without an upfront lock-in and the customer can end up having to lock into higher
interest rates when the home is completed.
Or the customer is sold on a higher rate during construction with a float down option after the
home is built. Again, the rate could be much higher when the home is completed.
With the changing financial marketplace you now have to pick programs that
protect you before during and after construction.
Most loan officers do not explain this to their customers until it's too late (Closing). Or worse,
the customer does not figure this one out until they notice their loan has no protection at all.
Always ask the following questions when applying for a construction loan. 1. Is the rate locked
or floating during construction? 2. If the rate isn’t locked can I lock into a rate during the
construction loan period? 3. Is there a float down option available?
17. Opening up escrow and obtaining title insurance.
(Some states require an attorney)
Escrow
Escrow is simply an escrow company or an attorney that will hold the funds to close the loan
and close the loan for all parties. A good escrow company will make sure all the entire
transaction details are covered and protect the interests of all parties to include the
customer, builder, funds, lender and title.




Both the client and lender to complete all forms and instructions necessary to complete
the transaction, including documentations required by federal, state and local
governments.
The client deposits funds sufficient to meet the total closing costs. (Usually, some of the
funds are financed by the loan.
The new lender deposits loan proceeds.
Escrow will set up the closing date and location and ensure the closing and funding.
What Is Title Insurance?
A Word About Real Estate
Real estate has traditionally been a family's most valuable asset. It is a form of wealth that
is protected by many laws. These laws have been enacted to protect one's ownership of real
estate and the improvements located on the land. The owner, the owner's family, and the
owner's heirs have rights or claims in and to the property that you are buying. Those who
may have an interest in or lien upon the property could be governmental bodies,
contractors, lenders, judgment creditors, the Internal Revenue Service, or various other
individuals or corporations. The real estate may be sold to you without the knowledge of the
party having a right or claim in and to the property. In addition, you may purchase the real
estate without having any knowledge of these rights or claims. In either event, these rights
or claims remain attached to the title to the property that you are buying until they are
extinguished.
The Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss due to the
occurrence of some future event. For instance, a party obtains automobile insurance in
order to pay for future loss occasioned by a future "fender bender" or for the future theft of
the car. Title insurance is a unique form of insurance. It provides coverage for future claims
or future losses due to title defects which are created by some past event (i.e., event prior
to the acquisition of the property.) These risks are far less obvious than those protected
against by automobile insurance, but can be just as devastating. The following information
will answer some commonly asked questions about title insurance.
Will You Get Clear Title?
It is of utmost importance that you receive clear title to the property when you purchase
real estate. In order to do so, you must first be informed of any existing rights or claims
that may, in the future, threaten your title and possession to the property. Title insurance
provides you with this twofold protection.
How Do You Find Out What Claims Exist?
In order to determine the status of title, Title conducts a diligent search of the public
records for those documents associated with the property. Title then examines those
recorded documents in order to determine if there are any rights or claims that may have
an impact upon the title to the property. The title search may reveal the existence of
recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied
mortgages, judgments and tax liens against the current or past owners, easements,
restrictions and court actions. These recorded defects, liens and encumbrances are reported
to you prior to your purchase of the property. Once reported, these matters can be
accepted, resolved or extinguished prior to the closing of the transaction. In addition, you
are protected against any recorded defects, liens or encumbrances upon the title that are
unreported to you and which are within the coverage of the particular policy issued in the
transaction. This is the first benefit you receive from title insurance.
What About Undiscovered Claims?
The title to the property that you have purchased could be seriously threatened or lost
completely by hazards which are considered "hidden risks." "Hidden Risks" are those
matters, rights or claims that are not shown by the public records and, therefore, are not
discoverable by a search and examination of those public records. Matters such as forgery,
incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in
the records are examples of "hidden risks" which could provide a basis for a claim after you
have purchased the property. In order to protect you against this possibility, Title provides
insurance coverage for such claims. This is the second benefit you receive from title
insurance.
How Does a Title Insurance Policy Protect Against All These Claims?
If a claim is made against your insured title, Title Insurance Company protects you by: (1)
Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of
settling the case, if it proves valid, in order to protect your title and maintain your
possession of your property.
Title Insurance Protects Your Asset
Title insurance gives you the assurance that possible clouds on title to the property you are
purchasing - which can be discovered from the public records - have been called to your
attention that such defects can be corrected before you buy. Additionally, it is insurance
that if any undiscovered claims covered by your policy arises out of the past to threaten
your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as
your title insurance policy provides.
Only One Premium
Unlike other forms of insurance, the original premium is your only cost as long as you or
your heirs own the property. There are no annual
18. Putting the entire construction loan budget together
(big picture).
The budget is the form that the bank will put together providing a snapshot of all the
numbers. This includes construction costs, loan fees, interest reserves, contingency,
appraised value, loan to cost and how much cash equity (down payment you need to bring
in if any). This form is not usually provided to the customer but it should.
Keep in mind that this form is meant to be a guide of the overall numbers for everything
included in the construction loan. The budget is not meant to take the place of the good
faith estimate or truth in lending statement. Below is an example of what a typical budget
looks like.
Notice that the budget includes the following variables, name, rate, term, loan amount, land
balance, construction costs, loan fees, interest reserves, contingency reserve, appraised
value, loan to value, cost of project, cash equity or down payment into the overall project
and funds required to close. I think the budget spreadsheet is one of the most important
forms for understanding the big picture. As part of this e-book purchase email me and I will
send you a excel version and pdf version for your use.
The budget that I provide should be used only as a guide since most lenders will have a
budget form of their own. The budget form that I use and have provided a copy of is easy to
use and is very accurate.
19. Why are interest reserve and contingency funds
being added to your requested loan amount and is it a
requirement?
The two items most customers do not factor into the cost of the building their new home are
interest reserves and contingency funds.
Interest reserves are added to your loan amount to make the monthly payment on your
loan. Yes, you read that correctly, you will not have to make a monthly construction loan
payment while your home is being built. The payments are made from this interest reserve
account and no, it’s not free. This reserve is added to your construction loan amount.
Interest reserves were designed for the benefit of the customer. Most people building a new
home are either paying rent or have an existing mortgage payment while their home is
being built.
The last thing a customer needs is another monthly payment while building. So, banks
created the interest reserve account by adding up the estimated interest payments over a
12 month period and add this to the loan amount.
If you do not want interest reserves added to your construction loan amount you can ask to
make your own monthly construction loan payment.
Contingency funds are added to the loan amount just in case you need more money to
finish building your new home. With all good intentions construction loans tend to have cost
over runs. The bank adds 5% to 10% of the cost breakdown and adds this amount to the
loan amount just in case you have cost over runs or need better appliances. If you don’t
need or use this extra contingency fund then it will not be added to your mortgage upon
completion of your new home.
So when you apply for a construction loan ask your loan officer to provide you a copy of the
estimated construction loan budget. This budget is not usually meant for the customer but
an experience construction loan should not have a problem providing this to you.
The budget is created from your costs and includes every cost within the loan including land
balances, closing costs, interest reserves, contingency and bank fees.
Call me and I will provide one to you via email.
20. Ordering your appraisal based on your house plans
and land to determine the loan to value and the
projected finished value.
I often get asked “How can you order an appraisal when the home is not built yet?” The
answer is that the appraisal is ordered by the lender or loan officer from an appraiser that
will be based on the house plans of the home including the value of the land. The appraisal
is one very important upfront variable to see if the estimated future or finished value is
within the banks guidelines. The loan to value needs to be “typically” between 50% to 80%
loan to value depending on the loan amount. Below is a typical lenders loan to value
quideline.
1.
2.
3.
4.
5.
6.
7.
80%
75%
70%
65%
60%
55%
50%
loan
loan
loan
loan
loan
loan
loan
to
to
to
to
to
to
to
value
value
value
value
value
value
value
for
for
for
for
for
for
for
loan
loan
loan
loan
loan
loan
loan
amounts
amounts
amounts
amounts
amounts
amounts
amounts
below
below
below
below
below
below
below
$650,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$5,000,000
Again these are only guidelines and every lenders guidelines will be different. The main
point though is that loans are approved by qualifying you, your builder, your project and
part of your project approval is the appraised value of your home.
21. How much money will you need for a down
payment and how that determines the bank required
loan to cost (LTC) and cash equity as some people will
call it?
Initially most banks are concerned with the loan to appraised value (LTV) but banks are
really more concerned with how much cash you have in the project (LTC).
If you were buying a home instead of building you would normally have to put up to 20% of
the purchase price as a down payment. Since you’re building a home your cash equity
usually comes in the form of how much cash you put down on your land or any pre-pays.
Cash equity is king when applying for a construction loan. For example, if you bought a
$200,000 piece of land and the land is owned free and clear you have a lot of cash equity.
With this much cash equity you will most likely not have to bring in any additional cash. Or
if you purchased a piece of land over 12 months ago for $100,000 and its now worth
$200,000, the bank will use the current seasoned value (12 months). In both cases you
have brought $200,000 cash equity to the table.
Now if you just bought a piece of land for $200,000 and you only put down $20,000 most
banks will want to see anywhere from 5% to 20% cash into the total project depending on
the size of the loan.
Other qualifying cash equity that can be counted are any pre-paid’s such as plans, grading,
permits etc. These pre-paid's can be used for cash equity or you can be reimbursed from
the construction loan at closing.
22. How does your builder get paid while your home is
being built and why it matters to them?
There are two methods that banks use to make sure your builder gets paid while building
your home.
The Voucher Reimbursement system has been around for quite a while. As usual you'll have
some builders that are very familiar with this method of payment and do not like change.
Most builders are really only concerned with how fast they can be paid and how often they
can be paid.
Most banks find that the voucher system is simply too much paperwork to deal with
anymore. The builder is given a big book of vouchers that looks like a check book and when
they want to get paid or need to pay a contractor they need to fill out a voucher form. This
voucher form is a request for payment and as long as the contractor has signed the lien
release the bank will pay the amount requested.
The bank will also request an inspection throughout the construction loan to make sure that
the work is completed.
The Draw Reimbursement system is becoming the standard for construction loan funding for
most banks. The main difference is that the bank puts the accounting responsibility on you
or your contractor. The bank uses your cost breakdown as the guide for the draws. Some
banks use specific schedules of 4 to 7 draws based on completed construction milestones,
such as foundation or framing. Builders are usually concerned about only getting 4 to 7
draws but that is only used for small loan amounts. The modern day draw system is set up
for builders to requests as many draws as needed as long as the work is completed.
The draw systems also allow the choice of taking draws on a monthly basis, collecting
partial payment for work and material items that have been completed.
Most customers usually prefer the draw reimbursement system because:
1. It requires less work.
2. Provides more control for both the customer and the builder.
3. The funds are wired directly into your bank account.
3. It's easier to use than the voucher system.
4. Some banks now have online draw requests. This allows you to request funds at midnight
if you want.
23. Your construction loan is approved now its time to
complete the loan conditions.
Almost all customers think that when the initial loan is approved that they can now sign
loan documents. Think about it, you just completed the huge task of putting together an
entire construction loan package and feel that you have completed everything necessary.
You went from buying land, obtaining house plans, plan approval, filling out an application,
providing all your financial papers, ordered an appraisal, your builder filled out a complete
approval package, signed a contract, completed a cost breakdown and I could go on and on
but the point is you just spent an enormous amount of time in order to get your loan
completed.
So what happens next? Your complete loan package is now gone through with a fine tooth
comb by the lender. This includes verification of all the entire details that you just spent
weeks if not months putting together. The bank will make sure you qualify, verify your tax
returns are accurate, your builder is legitimate, the appraisal was completed properly, the
cost breakdown makes sense, your insurance is up to date etc, etc.
Once this detailed construction loan process is completed the underwriter will issue a loan
approval and conditions. The conditions are all the details within your package that is either
missing something or is not accurate or does not make sense and the bank wants every
detail updated or question answered. At this point the average customer is spent. The
typical customer cannot believe the lender wants all of the details when they just spent
hours and hours of time putting together what they thought was a perfect package.
24. What type of construction loan insurance is required
and who is required to obtain it?
There are three types of insurance needed to build. All banks require the first two
insurances, course of construction and general liability. Workman's compensation is only
required if your builder has employees.
1. Course of Construction Insurance. This policy is an all risk policy to include, fire,
extended coverage, builder's risk, replacement cost, vandalism and malicious mischief
insurance coverage.
2. General Liability Insurance. You or your builder can provide this policy. This policy is a
comprehensive general policy or a broad form liability endorsement. The minimum amount
of $300,000 for each occurrence is required. If the builder provides the insurance a general
policy of $1,000,000 or a broad form liability endorsement is required.
3. Workman's Compensation Insurance. If your builder owns his own company and has
employees that are helping to build your home, workman's compensation is required.
Worker’s Comp In A Nutshell
Workman’s compensation insurance is required in most business settings to protect a
company and its workers from the liability that arises when injuries or illness occur. This
type of insurance covers both sickness and injury that are directly job related. The coverage
it generally provides includes:

Medical – Workman’s compensation insurance works in place of regular medical
coverage when a sickness or injury can be directly traced to work. If an employee,
for example, slips and falls, this insurance would kick in. So, rather than use a major
medical policy to pay for a broken leg, worker’s compensation would make the
payments to a doctor or hospital.

Wage replacement – When an illness or injury that is job related pulls an employee
away from working a regular schedule, workman’s compensation insurance will kick
in and replace wages. Generally, this is a percentage of lost wages and not the full
amount. Still, the coverage can be a vital link for keeping an employee financially
above water when reporting to work is not possible.

Disability coverage – When a worker finds returning to employment impossible
because of injury or illness, a lump sum disability payment might be forthcoming if
workman’s compensation insurance is in place.
Workman’s compensation insurance is required by law to cover employees from financial
damages that might incur due to work-related accidents or illnesses. When you act as the
owner builder on a property, this is an insurance that you should be familiar with, but
chances are you won’t need to purchase directly.
If the builder simply subcontracts out the work and does not have employees per se, they
will need to write a letter acknowledging that they do not have employees and are not
required to have WCI.
If your builder tells you he is not required to provide any insurance whatsoever he is most
likely correct because it is not a law to have insurance to build a house.
This requirement is set forth by the bank. So make sure you hire a reputable builder with
insurance, it will help your construction loan close much faster.
Ask your builder upfront if they have general liability insurance. If they do not ask if they
have a problem providing the insurance. Some builder's cannot afford or simply do not want
to pay for the insurance and then guess who has to provide it, yes, you do. You can save
yourself a lot of headaches and money if you work with a builder that has insurance.
Saving Money On Course Of Construction Insurance
If you’re shopping around to have your own home built and have discovered that going it
alone is one of the most cost-effective approaches to take, you’re on the right track. As an
owner builder, you will be afforded opportunities throughout the construction process to
save some serious cash without having to rely solely on your skills to get the job done.
Taking on this role, however, does require that you assume some responsibilities along the
way. Making sure course of construction insurance is in place is one of those responsibilities.
What Is Course Of Construction Insurance?
Course of construction insurance is a special policy that protects you from liability and theft
during the actual building of your dream home. This type of insurance is sometimes
provided by a general contractor. This may not always be the case, however. It does pay to
make sure coverage is in your contract if you’re dealing with a general contractor. If you’re
going it alone, you will have to get a policy in your name.
Who Requires Course Of Construction Insurance?
Course of construction insurance is generally required by mortgage companies that finance
the construction of new homes. This protects their investment in your home-building project
and it also protects yours. When you have a proper policy in place, you’ll be protected from
such things as:

Injury claims – If someone gets injured on your homebuilding site, this type of
insurance will cover it. While a builder’s own insurance or workman’s compensation
will likely cover the construction personnel on site, those policies don’t extend to
passersby who might be injured during a mishap.

Damage – If your half-built house is damaged due to fire, theft or other event, a
course of construction policy should cover the costs of replacement. This is vital to
protect the investment that is already in place.

Theft – Jobsites are like a candy store to small-time thieves. Copper wire, tools,
expensive machinery and even wood and other materials can all be targets for crafty
thieves. They can arrive in the dark of the night and rob a construction site blind.
When course of construction insurance is in place, the losses should be recoverable.
This means the job can get back on track with relative ease even if the unthinkable
happens.
Why Should I Get Course Of Construction Insurance?
Course of construction insurance will add on somewhat to your overall bottom line. This
type of policy, however, can be a vital lifeline if the unthinkable does happen. The reasons
to heed your mortgage company’s request and purchase a policy include:

Legalities – Lenders who are willing to fund construction projects are generally pretty
serious about having this type of coverage in place. If you cross them, your
mortgage could be voided. This would mean the mortgage company would have the
right to call in your debt – even before your home is finished an habitable.

Peace of mind – When course of instruction insurance covers a property during
construction, you can sleep at night. While theft, fire and other damages might delay
your homebuilding project, they won’t sidetrack it indefinitely.

Personal protection – As the landowner you can be held liable for injuries that
happen on your property during construction. This type of policy provides you the
protection you need to fend off claims without having your personal assets
threatened.
How To Shop For A Policy Without Paying Too Much
Course of construction insurance is a vital link that protects you from liability and loss
during the building of your dream home. As important as it is, it doesn’t make sense to pay
even a cent more than you need to for coverage. After all, chances are your building project
will flow fairly smoothly from beginning to end.
So, how can you save money and still get the insurance you need? There are a few things
you can do to be certain your get a good policy at a price you can live with. They include:

Getting multiple quotes – There are a number of companies that do provide this type
of insurance. Take the time to obtain multiple quotes and so compare what all is
included before making a final decision.

Vetting companies – It won’t do you any good to have the right insurance in place if
the policy won’t pay out when you need it to. Take the time to vet the reputation of
the companies you’re considering. Even if you do have to pay a little more for
insurance to obtain a good policy, you can make up for it later in the construction
process.

Setting limits accordingly – Do make sure you’re not going overboard with coverage
amounts. If your total materials and structure are worth $200,000, it doesn’t make
sense to insure $300,000. Also, do make certain your limits – especially in regard to
liability - are set in accordance with what your mortgage company requests. Having
too little coverage is almost as bad as having none.
Course of construction insurance is nothing more than a policy that will cover you if the
unthinkable happens while your home is being built. It doesn’t make sense to pour your
lifesavings into a home project and then have it go up in smoke due to an unfortunate
accident, act of weather or theft.
Whether you’re acting as the owner builder or you have a contractor lined up to supervise
the job, having the right coverage will provide you with peace of mind. It is possible to save
money on course of construction insurance, but don’t do it at the expense of proper
protection.
Tips For Saving Money On Builder’s Risk Insurance
If you’ve made up your mind to have your dream home built from the ground up with you
at the helm acting as the owner builder, you’re embarking on a rewarding journey. The
prospect will be fraught with challenges, no doubt, but going this way can save you
thousands over the course of construction. The adventure, however, will require that you
not only learn a whole lot about the process of building a home, but also the insurances that
should be in place during this time. Builder’s risk policies are just one of many you might
want to consider as your dream home becomes reality one wall at a time.
There are some specific things you need to know about builder’s risk before deciding if this
type of policy is the right way to go. Sometimes it might be all that you need to cover your
property, but in many cases it’s just a piece of the overall coverage package you should
have in place to protect you, your property and your investment while construction is
ongoing. There are several questions about builder’s risk insurance that owner builders
often ask. Understanding their answers can help you determine the best course for cost
savings.
What Is Builder’s Risk Insurance?
This is a specific policy that is generally put into effect while construction is ongoing. It will
not cover damages that occur before or after the construction process.
What Does Builder’s Risk Cover?
A builder’s risk policy typically covers any and all risk, such as theft, accidental loss,
vandalism and destruction, of the property itself. It generally applies to structures on a
specific property and not the property itself.
What Doesn’t Builder’s Risk Cover?
Builder’s risk insurance is meant to protect property and not people. While this type of
policy will help with replacement costs if damage occurs to a building under construction, it
will not cover people injured in an accident or other types of liability that may arise during
the course of building.
This type of policy is generally purchased by contractors personally to cover their
investment in a property that is under construction. The policy, for example, will protect
contractors if their materials or completed work happens to be damaged prior to turnover
and payment from a homeowner.
What Do I Need To Purchase Builder’s Risk Insurance?
An insurance underwriter will need several things from you if your intent is to buy builder’s
risk insurance to protect your property during construction. The piece of information that
will be essential for purchase include such things as:

The total estimated cost of the project.

A complete description of the project, including blueprints and floor plans. This will
help an underwriter make certain the proper coverage is in place.

The location of the construction.

The anticipated phases of construction and the targeted completion dates for each
phase and the overall project.
Is Builder’s Risk Really Necessary?
Builder’s risk insurance is considered essential whether you’re building your home yourself
or you hire a contractor. This type of insurance will protect your investment in your home or
protect your contractor’s investment.
As an owner builder, you might be able to save yourself some money on this type of policy
by purchasing builder’s risk along with other necessary coverage. It can, for example, be
purchased along with course of construction insurance. It is not uncommon for course of
construction policies to include a builder’s risk component, especially for owner builder
policies. Course of construction goes beyond the actual property to include such things as
protection against:

Liability – It is a very good idea to have liability coverage on a property during the
course of construction. This protects people from accidental injuries that may occur
while they are on the jobsite.

Materials losses – Course of construction insurance will generally protect materials
and items needed for construction.
Having builder’s risk and course of construction insurance in place will likely be a
requirement of a mortgage company. Whether you are financing your dream home or not,
however, it’s a good idea to have coverage to protect your own investment.
Money Savings Are Possible
Saving money on builder’s risk insurance is possible if you shop wisely. It is important,
however, to make sure you don’t shortchange yourself on coverage just to save a few
bucks. To get the best policy for the lowest possible pricing, make sure to:

Obtain multiple quotes – Never settle for the first policy offer you receive. Take the
time to obtain at least three quotes to get a good idea of the costs involved in
purchase.

Check into company backgrounds – Make certain the quotes you are obtaining come
from reputable insurance companies. It does you no good to have coverage that
won’t pay out when you need it to.

Be certain you are getting the right coverage – Builder’s risk and course of
construction policies are often required by the terms of your mortgage agreement.
Be certain you understand what is required and purchase accordingly.
Builder’s risk insurance protects your property while construction is under way. Having this
type of coverage in place is essential for protecting your investment and helping make
certain the construction process on your dream home doesn’t turn into a nightmare.
Saving Money On Your Dream Home’s Flood Insurance
Breaking ground on your dream home’s construction might rank up there with some of the
most memorable moments in your life. Making sure this moment doesn’t cost a cent more
than it has to, however, can be vital. Flood insurance is one area that can tack on a fair
amount to your bottom line, but there are ways to cut its costs out of the picture entirely if
you plan carefully. If you must have it, there are steps you can take to keep the pricing as
low as possible.
When you select and purchase your own land to build on, you will have control over the
need for flood insurance. If you take things a step further and act as the owner builder on
your property, you’ll be able to save in other areas of construction should flood insurance be
required no matter what you do.
Selecting Your Land With Flood Insurance In Mind
Flood insurance isn’t technically required by the terms of a mortgage agreement on every
parcel of land in the United States. Generally, the need to have flood insurance is
determined by a parcel’s location on Federal Emergency Management Agency flood maps.
These maps are created state by state and county by county to show the areas that are
more prone to flooding than others. When a property falls within a flood zone, lenders will
require flood insurance.
The typical rule of thumb when you’re looking at property is to see if it is located near:

The ocean

A lake

A pond

A river or stream
Waterfront property will almost always require flood insurance. Property within the flood
plain, however, can be a little deceiving. A home might appear to be high and dry and far
enough away from a water source, but history might show it’s subject to flooding. The best
way to be certain about a particular parcel is to look it up on the flood maps.
If you don’t want to pay for flood insurance during construction and after it, you will want to
make sure lots you are considering fall well outside the flood plain in your area.
Selecting Land To Avoid Flood Insurance Requirements
If you don’t have your land in place for constructing your dream home, you are in the
driver’s seat on whether this expense has to be a part of your future or not.
If you’re concerned about making an extra monthly or annual payment, select your property
with care and do reference flood maps for your area. It is possible you can have your cake
and eat it, too, if you pay attention to the maps. For example, you can purchase a sizeable
parcel and place your home outside of a flood zone. Your property might have a stream or
pond on it, but the structure could conceivably fall outside the zone – if you situate it
correctly on the land.
In most areas, flood insurance is a fairly reasonable expense, however. If it’s your dream to
have a house on a lake, don’t let this extra requirement scare you off. Just examine your
options and your budget and then proceed accordingly.
A Case For Flood Insurance
Even if your property doesn’t fall within a flood plain, it is sometimes a very wise idea to
purchase flood insurance. Most homeowner’s insurance policies do not cover floods at all.
This means if by some fluke your property does flood, you could be left out in the cold
paying for damages yourself. Even if your mortgage company didn’t demand the purchase
of a policy, it will be your problem to pay for necessary replacements and repairs without
the coverage.
While it is unlikely that flooding will occur in property that is high and dry, it can happen.
With this in mind, it’s a good idea to consider coverage regardless. In areas outside flood
plains, this coverage is generally very minor in pricing. A little extra in escrow each month
can deliver peace of mind, which many homeowners find is worth the expense.
When To Buy Flood Insurance
The timing on making a purchase of flood insurance can be critical for following the
guidelines of your loan and also ensuring property is well protected. While it might seem
silly to purchase a flood insurance policy on a home that isn’t even built yet, the best
recommendations call for having this coverage in place before the first materials shipment
arrives for construction.
To be certain you purchase flood insurance when you’re supposed to, check with your
mortgage lender. Some require coverage prior to closing on a loan. Others, however, are
more flexible on this front. It does pay to check and be 100 percent certain.
Saving Money On Coverage
Flood insurance can be a difficult buy in some areas of the country. The hurricane torn Gulf
Coast, for example, has had issues with insurers pulling out. Still, there are ways you can
get the coverage you need without necessarily paying through the nose for it. To make sure
you’re getting the best buy, make sure to:

Obtain multiple quotes – It’s never a good idea to settle for the first price quoted on
anything. Shop around for your coverage and you might find flood insurance can be
had for a very small annual fee.

Check into company backgrounds – Insurance companies should be vetted for their
licensing to operate within a state. It’s also a very good idea to check into the
payment record of a company.
Flood insurance is an area you can cut corners on in some cases to save money on new
home construction. If you want to properly protect your dream home during building and
after, however, it is smart to carefully consider options and weigh the expenses involved in
having this type of coverage in place. It doesn’t make sense to pour your heart and soul
into building your dream home to have it all wash away in the blink of an eye.
25. Signing loan documents and making sure your loan
officer is on standby to answer your questions.
Well you’ve made it through the construction loan process, congratulations. At the
beginning of the loan process every customer wants the lowest price, lowest fees, best loan
and best rates. The secret to getting that is by focusing first on the competence and
experience of your lender and loan officer. Secondly you want to focus on the fees and
rates. I know it’s against your nature to do it that way but if you work with an experienced
and reputable loan officer everything tends to be a positive experience.
Ok I said “tends to be a positive experience” but the last key ingredient is whether the loan
officer cares or doesn’t care, that is the ultimate litmus test. Have you ever noticed that the
best people and companies are the ones that care about their customer service? You know
the who they are, they are the ones that take extra effort in you, your loan, service, details
and anything that’s important to you and them.
I have been providing construction loans for over 25 years and I’ve become successful at
doing that by helping my clients get the best loan possible but I’ve noticed most clients tend
to get in the way of a obtaining the best loan. Can you blame them when most real estate
financial transactions can be stressful.
In all the years I’ve been providing construction loans the customers that end up with the
best rates and programs are the ones that never panic or over worry about those important
details. If you’ve chosen a lender and loan officer that cares about their business you will
almost always get the best loan. Now the point of this secret is to stay in tune with working
with people that care throughout the entire process of obtaining your construction loan. So
when you hire a builder do they return your phone calls? Did the builder provide a complete
detailed cost breakdown of your home? Did your architect take extra care in the details of
you house plans? Does your lender and loan officer answer your questions? If someone
failed you in customer service do they make it up to you? I could go on and on but the idea
is to work with people that care. If you can focus on that concept when working with people
you will be just fine.
Once your loan is completed and you’re ready to sign documents is your loan officer
available to answer any of your questions. Loan documents can be very confusing so you
either need to have the loan officer available at the closing or via phone. I always make it a
point to find out when the client is signing loan documents so I can make sure that I’m
available. I also take extra care to make sure everyone knows that I’m available either in
person or via the phone.
26. Your house is complete you have your notice of
completion and it’s time to convert the loan and move
in.
Your construction loan period was either a 6, 9, 12, 15, 18 or 24 months depending on how
big your home was and how long of a construction loan period you chose or was offered.
Once you and your builder got the hang of the draw system and your new home is about to
be completed what happens next. First of all I hope you had enough time to build your new
home because if you go beyond the construction loan part of the loan you may have a
extension penalty. From my experience customers and builders underestimate the build
time quite often and you should always make sure you request the proper build time.
My experience depending on the size of the home is that you want 3 more months more
than you think you and your builder estimate. So if you builder says it will take 9 months to
build ask for a 12 month construction loan. It does not cost you more by requesting a
longer construction loan period and may even save you money because you most likely will
avoid the banks extension penalties.
Once your home is complete its time to obtain the certificate of occupancy from your local
building inspector and convert the loan into the long term financing. If you had a one time
close you will not need to pay any additional closing costs. The main concern at this point is
converting and making sure you convert into the best interest rate. If you locked the
interest rate upfront you most likely have a float down option if rates improved. You need to
ask the construction loan conversion department what the current rates are so that you
obtain the best rate. Keep in mind the original loan officer does not help with the rates at
this time unless it’s a 2 time close loan.
If you did not lock in the rate upfront you will want to work with the construction loan
conversion department about 60 out from completion of your home. You can lock into the
best rate available at this time. If you had a construction only loan you need to refinance
and you will want to work with your original loan officer or shop around for the best rate.
About the Author
The above information is from 25 years experience in the construction lending
business. If you have additional questions and or would like to apply for a
construction loan to build your new home, call me on my direct line (866) 2113344. This e-book is worth anywhere from hundreds to thousands of dollars. One
additional bonus I have for you is a free appraisal for every customer that utilizes
our services. To qualify you must fund and close your construction loan with us.
Call me for details.
Or visit our website and either download a complete construction loan application package
or request one to be sent to you by mail.
I hope this information has cleared any confusion and that building your new dream home is
truly a great experience.
Any questions please call me.
http://www.CaliforniaConstructionLoans.com
http://www.NationwideConstructionLoans.com
Thank you,
Sincerely,
Rick Gomez
Owner of Nationwide Construction Loans, Inc.