What They Don't Tell You About Building a New Home

Recently on Fox News channel, they stated that currently we are in the "buyers" market for houses. This means that it is basically good for the person wanting to buy a new or used home, especially since the interest rates have lowered and are holding steady. So what do you do if you want to buy a house, or better yet build a new one? It's virtually painless and I am going to tell you the general steps in new home ownership. I also will share the "hidden costs" that the builder doesn't tell you about. After all, it's better not to venture into such a big purchase blind.

You can start off doing one of two things. 1) Check your credit to see if there will be any major "problems" with financing. It's pretty self explanatory, but they will want to look at your debt-to-income ratio along with how good you are at paying things off. 2) Locate a couple areas you would like to own a house and see which companies build there, along with the average house price. A huge thing my husband and I took into consideration when looking for a place was the school system rankings compared to the rest of the state. Other things you may want to look into are what taxes the area has, as well as statistics such as crime and environmental issues. Everything is easy to find on Google.

So once you narrow down areas and skim over your credit, then it it's time to hop in the car and go to look at different houses and different builders. The area we chose only had a handful of builders and only 2 of them were well heard of, so it was easy for us. I would make sure you do a little research online about the builders as well. Some have a not so "clean" reputation when it comes to being "customer" friendly and that's the last thing you want to deal with when a major issue arises with your new home. Now, when you begin touring various model homes for the builders, the sales associates will try to give you 1001 different floor plans to look through. Take them with open arms! You are looking to buy a house that will be way over $100,000 so you will want to be 100% sure that you love the layout. Another thing to keep in mind is that some builders change the names and floor plans they have available more than the average person changes their underwear. So don't forget to ask about upcoming plans or ones that will cease to exist soon.

Once you settle on a few floor plans, I think it's best to figure out which builder you like the most as well. After researching each one, try to narrow it down to who will treat you the best and give you the best options for your buck. Once you have 1 builder in mind, go to the model in the area that you are looking to build and ask questions. Ask the sales consultant anything and everything you need to know, even about financing. Once there, they can pinpoint any houses or models they have available that you can actually walk through to see what the home would look like. Try to take your time and not rush. This is a big purchase and you want to be happy with what you choose. If the sales consultant is pushy and seems bothered, then leave and go to another model center. They can help you from any model, even if it is not in the community you are looking to build in.

So after thinking long and hard and asking everything you need to know, you decide on a house you definitely want. What do you do next? Call your sales consultant, tell them you chose a house, and set up an appointment to meet and possibly draw up a contract. Do not let them rush you through the process. If you feel out of control and rushed tell them you need more time to get your head wrapped around everything. There really is not rush until actual closing time. So you set your appointment and then meet to talk about a possible contract agreement. The builder we went with asked for a small "down payment" to hold certain things. We didn't have to pay all at once and they were pretty flexible about things. All together we gave them $1000 up front until closing. During the contracting there is a lot of questions asked by the sales consultant as well as a lot of documents to sign, but don't get worried. You have so long to change your mind and still get any deposits back. Some of the things you may go over include: do you want any of the added features in the house such as bonus rooms or extra bedrooms, do you want a full or partial basement, and do you want a front porch? The floor plans you were given earlier show some of the add-ons you can add into the base price of the house, so keeps it in mind. Oh, and by the way, if given an opportunity to pay an extra $1000 or so for a bigger lot I would recommend doing it. Not all lots that come with the house have much room for a yard once the house is built.

The sales consultant will tell you the next steps you will need to take. With us, we had to do the intitial financing. We chose to meet with their financing office and way out our options. There was a fee of $300 paid to the finance company for everything they had to do, but we never had to give them a penny more. At this point, things tend to go rather quickly. After getting the financing straight and having an idea of what our payments would be, we went to the home center to pick out everything that would go in the house. By this I mean, counter tops, carpets, other flooring, rails for the stairs, cabinets, the siding and doors for the house, etc. You will be amazed at home many things you actually have to pick out. This is also a place where they can begin to add things into the price you already thought the house would be. However, if your sales consultant is really good and very honest he/she will tell you in the contracting meeting earlier what you can expect to be included and how much things are to add on. Generally speaking don't feel like you are the only one that has felt overwhelmed after leaving the design center. Most of the time people forget what they pick out and have to go back to refresh their memory, so don't worry! Normally they will also allow you to make changes up to a certain time without charging you a fee. And keep in mind that if you upgrade anything, you will need to contact your finance officer to up the price of the house as well.

So you've gone into contract, got a feel for the mortgage, and picked everything out. What now? Well it depends what point the builder is at with the land your house will be on. We bought from a section that took around 5 months just for the land to be approved for digging. This is where I can make another point about financing. In Ohio they can't lock the interest rate until roughly 6 months from closing. So keep this in mind if you know they will not start digging for 5 months and it will take another 4-5 months to build the house. In other words, when you met with the finance officer and they gave you a quoted rate of 4.5%, that rate is not locked until 6 months from closing. So if it's going to take 10-12 months to actually build and close then your rate could go up or down by that 6 month period.

This will be the time when things seem to take forever. You will constantly wonder and maybe even drive by to see if they broke ground yet. Most builders will try to give you a heads up, but keep in mind that nature and weather can play a role in things as well. But, after what seems like forever you will eventually be called by the builder to come in and meet with them on the blue prints of the house to make sure they are 100% on what is to be built and what will go inside. This will be the time to make sure they have everything written and marked correctly. This will also normally be the final cut off for making any changes, even though they may charge you by then. But not to worry, you have had a while to think things over and should be fairly confident at what you have chosen.

After the meeting about the blue prints, you will take home a list of contractors you will need to call during certain points of the building process. These contractors could be for things such as a home security system, wiring, lighting fixtures, and landscaping. You will also be contacted from time to time by the sales consultant and the financial officer for various things such as more documents to be signed and so forth. Now, this is the point where there may be more hidden costs that you normally wouldn't know about. When we met with the lighting company, there was a pre-set package of lights that came with the house. If we wanted to upgrade then that would be money out of pocket for us. Let me tell you now that with most standard lighting, you will want to upgrade some of it. We tried to keep all of the lighting similar through the entire house, which meant upgrading the lighting for the 2 ½ bathrooms and the dining room fixture. The builder we chose supplied the ugliest bathroom "strip" lights you could imagine. They were very cheap and looked like what you see in the bathroom of an apartment. When all was said and done, it was over $300 extra just for lighting. Next came the wiring for the house. Our builder allows for 2 free cable outlets and anything more was $50 extra, per outlet. The one good thing about getting a house built and dealing with the wiring is the option of having the house wired with Bluetooth technology. The price varies for this, so you would have to check with the contractor for your area. Other things you can think of as out of pocket expense would be if you want the home security linked to the company, which is a monthly fee. Also, your house will come with a certain amount of landscaping, but there is always room to add on more or "upgrade".

So after all of the meetings and "upgrading", you're done and just waiting on the house to close, right? Wrong. Don't forget that you will need to contact insurance carriers and get a quote on a year of home owner's insurance. You will need to show full payment of this within a certain amount of time before closing. With us, it was 15 days prior. Just to give you a ball park figure, we went with the insurance company we had been with for years of car and renters insurance. This gave us a great discount and 1 year of insurance was approximately $400. I know, things keep adding up right? Well, we're not done yet. Don't forget to add in the extras you will need and the cost of the actual move, along with switching your utilities. When we contracted the house, we decided to save a little money and only have certain "rough-ins" put in place for ceiling lights and fans. The home builder wanted to charge an arm and a leg for a tacky ceiling fan and fixture, so this saved us a little money doing it ourselves. However, you have to remember to go out and find what you need so you can install it once you move. This cost us an additional $200 for ceiling fans and lights. Do you think your garage comes with an opener? Not usually. Sometimes this can be an add-on, but remember that anything you add into the price of the house will also have interest added into it. So why pay more for something you can get at the local Lowes or Home Depot and install yourself? A regular opener without anything major will be around $130, but can cost more and it also depends on if you want the store to install it for an additional fee. There are also things you may not think about such as window coverings. Remember they are building you a house, not renting you an apartment, so some things like window blinds will not be included.

So after paying for the deposit, financing fee, upgrades, home owners insurance, general things you need, a moving service or a truck, and utility changes, and closing costs, it can be a pretty hefty total. Don't let this scare you though. You will need to do a budget for the financing anyway, so why not stick to it? Try to buy one things every 2 weeks for your new house so by the time you close you have everything. Plus, keep in mind that there may be relatives that will give you "monetary gifts" once you close and move in, to help you get the other things you need. All in all, it was long yet interesting, and the stress was enough to kill a horse at times, but it was all worth it. To be able to say that you were able to build your own home, where you want it, is the best feeling in the world. So go ahead and go for it. At least now you will have an idea of what to expect. Just try to sit back and enjoy the slightly bumpy ride to home ownership.