Custom Home Building Process

Whew, back in business today.  I left my house at 5:30am yesterday and arrived home at midnight.  I flew out to Utah for a few hours and then came right back.  Long ride, long day.  But!  I'm back at the office this morning cranking.  Here is a long post about home building that I wrote on the plane last night.  Feel free to skip right over if you have no interest in how building a home happens!  

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I know building a house is different for everyone but this is the process we have been through!

First, our neighborhood is one that isn't built by one home builder like a Lennar Home or Toll Brothers.  Ours was originally developed by one guy. He bought the big piece of land and subdivided it, built the roads and installed utilities in the roads to stub to each property.  From there, many different home builders have built in it.  If it had been a neighborhood like one of the large companies, you'll see the same house/floor plan throughout the neighborhood and be limited in your options of what's in the house.  As in, you go to their design center and pick from five cabinet door fronts or eight different sink faucets.  Of course you can always upgrade your selections but you don't usually have free reign to use a company you want to for granite or whatever.  Essentially the process is the same - you can spend what you want but are limited to their house designs and options.

Our lot was owned by a builder.  So this is what went down:

1.  We put the lot under contract.  Kevin was our real estate agent!

2.  We started dreaming up plans and worked with an architect on them (our builder hired him - will be hiring our own architect next time).  Floor plan design went on for about 5 months.  Thanks to my friend Ashley for basically designing the plans.  She knew my vision!

3.  Our builder then gave us a price for our exact house.  We negotiated a little bit.  This is what the total price included - the lot (we already knew this cost), the house cost and the allowances.  

Let me break it down for ya - the house cost is the cost that our builder takes the risk on if that makes sense.  Meaning, we won't pay more for those items unless we change the scope at the last minute.  They were basically known amounts - lumber, foundations, drywall, mechanical, plumbing, electrical. 

Ok the allowances - we have about 20 line items that are allowances.  These are things that we pick out depending on our taste and preference.  We could choose to spend more or less on these.  Our builder inserted a typical amount for each line item and that's what our loan amount was based off of.   So for example - we have $100 for all the tile in our house, we have $500 for cabinets in the house and $200 for all the granite.  Obviously these aren't the amounts but you get the gist.  So if we spend $50 on the tile, we can use the savings for other line items we may go over.  Or if we have savings at the end of the project, the bank writes us a check for the savings.  Just an FYI, you will never have savings when you build a house!  The fact of the matter is that the allowances he put in the contract were not enough for most of the line items. Some have been but most haven't.  Or maybe we just have expensive taste on certain things.

So guess how you pay for the overages in allowances?  Out of pocket.  They aren't included in your loan.  

On the allowance items, our builder has his typical people that he uses so you don't have to find the people.  So you can use his guys or you can use your own or a combo of both.  We are doing a combo!  I like price check the big ticket items to be sure we are getting a good deal.  

4.  Once we have a total cost of the house, we sign a contract with the builder and also a spec sheet which states exactly what we are getting.   These documents go to the bank and we get a loan for the whole shebang.   Then we close on the land and construction loan all together and we get to start paying monthly on it.  We started this in June 2016.  Construction didn't start until December 2016 mmmkay.  Thankfully you only pay interest on what you have drawn off the loan....AKA the amount that the builder has gotten from your loan to design plans or build the house.  There are other details about all of this - like we had a certain time period our construction loan is in effect then you pay extra when you go over that time period.  Yeah it's very exciting.  

5.  After we closed on the house, we didn't start construction until late December.  Most of this time was taken up with figuring out what the house would look like with the floor plan we had drawn.  And by "we" I mean my friend Ashley.  Ha!  She is amazing!  Our poor architect that our builder hired...well he and I did not see eye to eye.  Thank goodness for Ash!   After we got this figured out we spent about two months figuring out what brick to use (I was so over it at that point and Kevin picked the brick), then 6 weeks getting neighborhood architectural approval.  

6.  Then construction began and our builder and I had already been working together for a year but this was the start to our real friendship haha and when I start bugging him daily!  I joke.  Kinda.  It's what I do for a living - build things - so this was another little project for me. It just so happens the money was coming out of our checking account.  Mike and I actually have a good working relationship and he has been really wonderful throughout everything.  He has to deal with my million questions daily.  I do not let details slip by!  Ha!!  Gosh, I know too much about this house.  That's a different story.  

7.  So as these allowance items have come up during construction, we can select anything we want for each line item.  If we want to spend $1,000 on granite, we can but we just have to pay our builder the $800 overage or save it elsewhere.  We are putting a lot of things on our credit card to get points and because we know we are going to be over budget so we are trying to spread expenses out.  We don't want to get to the end and owe our builder a huge check.  

7.  Once we move in, nothing happens with our loan.  It just goes into permanent loan status and rolls over to regular mortgage payments.  It's nice to not pay closing costs again.  

So what questions do you have?  What did I forget?  Leave a comment with your email address so I can reply to you!  I get questions on here often and can never respond unless you have your email linked up which most don't.   

Thanks for letting me ramble! This house building has been a big deal and a huge part of our lives for the last 1.5 years.  Every night after Molly Anne goes to bed, Kevin and I are talking house stuff and making decisions!  It's been pretty fun so far!