If you dreamed as a child of someday owning a home with your own dance studio and ballet barre, or a personal game room with a Skee-Ball machine alongside an indoor putting green, then a custom home may be your best option to making that dream come true.
While buying a home fulfills a big part of the American Dream, building a home to your specifications elevates the experience. Before you begin to make decisions about your future home, you will need to spend significant time learning about the custom-home building process.
Organize Your Financing
Building a custom home isn’t necessarily more expensive than buying a newly built or existing home since it’s possible to build a small custom home, but sourcing all materials on an individual basis rather than in bulk can raise the price above production homes. The important thing to understand is that your decisions about the land you buy, and the design and quality of construction you choose will impact the final price.
Financing a custom home requires a construction loan, something not all lenders offer. If you don’t already own land, you will have to finance the land purchase and then the construction. Often you will have two closings, each incurring settlement fees.
Since building a custom home is considered risky by lenders, you typically need excellent credit and a down payment of at least 20% to 25% to qualify for a construction loan. In addition, lenders typically require more cash reserves for borrowers who are building a custom home to ensure that they have funds in place for any glitches that extend the construction period.
Make sure you check into appropriate insurance, too, during the construction period.
Interview Architects and Builders
If you already have a sense of the type of home you want to build, you can begin searching for architects in your area who design similar residences. Some custom-home buyers opt to find a builder first who can then recommend an architect, while others choose to hire an architect first. There are also design/build firms that handle the entire project. No matter which route you choose it’s important to check references, interview potential partners and visit examples of their work to see the quality before you finalize your choice.
Start With Land and a Plan
If you already own land, you should meet with potential builders and architects at the site so you can discuss potential issues and plans. If you don’t own land, some builders can help you find a site or they can direct you to a REALTOR® who can help. It’s essential that your home design and land plan match: You wouldn’t want to design a residence and then find that the site you’ve purchased can’t accommodate it.
Your builder should walk the property with you and determine how much preconstruction work is required, such as the placement of utilities, a septic system and a driveway.
Consider the Neighborhood
Most people who build a custom home believe they will never sell it, but eventually you may want to move to a different area or even build another custom home. It’s always wise to consider resale value when building a home. In particular, you want to match the price range and general size of your custom home to others in the neighborhood so that your house doesn’t stand out as oversized or overpriced.
Avoid Delays and Cost Overruns
Planning your home from the foundation to the roof and every single item in between can save you time and money when you are building a custom home. Your decisions about every detail in your home should be made before construction begins so you can reduce the possibility that materials won’t be available when needed, or that you will need to rip out things already built to accommodate a change order.
Good planning and hiring a good team can make the custom-home experience as easy as dreaming.
Michele Lerner writes about real estate, personal finance, and business news. She is the author of two books about home buying. She also enjoys writing fiction, visiting art museums, and tutoring kids.