Planning for Home Building

Designing Your New Home

• You can purchase a ready-made set of house plans, or you can meet with an architect who can draw a custom plan just for you. Make your architect aware of your budget. The home's square footage is not the only cost consideration. Interior and exterior details and finish can add tens of thousands of dollars or more to the price of your home. Vaulted ceilings, additional bathrooms and the pitch of the roof all affect the final cost. You will also spend more money for custom cabinetry, spa-tubs, large master suites and upgraded fixtures and appliances. These costs can add up quickly.

Lot Acquisition

• After you have a house plan, start looking for the ideal lot. Location, location, location, your real estate agent will say, and she's right. Not only should you choose a lot in a neighborhood with homes similar to your house plan, but you'll quickly find out that lots in different subdivisions come with different building requirements. Ensure your house will fit on the lot you choose. This may seem like a no-brainer, but the lot you see from the street does not accurately represent the space available for construction. The building area is subject to setbacks and easements, which may take up a large part of the lot.

  Study the subdivision's covenants before buying a lot. Covenants, which are similar to building codes, vary, but they may dictate the pitch of your roof, minimum and maximum square footage, the type of exterior siding you choose and even whether you can build a storage shed or put up a fence.

Financing the Project and Protecting Your Investment

• Unless you're rolling in dough, you'll probably need to borrow some of the money to build your new home. Your banker will analyze your income and your current expenses to come up with the amount of money you can borrow. The projected value of your new home is also a consideration. The bank won't give you a mortgage right away; instead, it will set up a temporary construction account. As the contractor completes various agreed-upon stages, you will make a draw against the money in the construction account to pay the contractor. Your banker may require a preliminary budget, and he may compare the actual expenses with the projected costs when you make a draw.

  You're too early in the process to get homeowners insurance, but you still need to protect your investment. Before construction begins, take out a builder's risk insurance policy that will reimburse your expenses should theft or damage to the structure occur.

Finding a Contractor

• You've heard the horror stories of dealing with a shady builder, but you can greatly reduce your risk by checking out your contractor before you sign a contract. In addition to soliciting bids from at least three contractors, contact the last three clients of each contractor. Ask those parties about their building experience. Ask about the builder's temperament and if he is open to minor changes. Find out if he can communicate effectively and if he stayed within budget. Ask the parties if they like the quality of their new home. Word of mouth is still one of the best ways to find a reputable contractor.

  Analyze the bids carefully. The lowest bid isn't always the best deal. If there is a large price discrepancy, compare the quality of the materials the contractor plans to use. Also, inspect the bids from different subcontractors to see if they are offering identical services.