So, you want to build a new house, eh? Well, buckle up. You’ve got some work to do!
Talk to a Lender
Not surprisingly, the decision to build vs. buy starts at the exact same place… the budget! When deciding to purchase real estate, get your financing in order FIRST. You simply cannot know where to look for land or what builders to interview without first knowing how much you’re going to be able to spend.
Loan originators can give ideas of what kind of financing options there might be for your new home. Most builders will prefer to hold a construction loan for a variety of reasons. If you get a loan for the amount of your project, overages will likely have to be paid with cash from your pocket. (And, rest assured, there will be overages! There always are.) Oftentimes, it will be more expensive for the buyer to hold the construction loan.
Interview Builders
It’s at this point that you should interview builders and get quotes from them. It can also be helpful to select your lot WITH your builder.
As you have that initial interview, discuss what your budget looks like and see what they might have to say about your ideal location, type of home, and other details. Many local builders will have insight about topography and soil types that might have a big effect on what you can and cannot build. Some builders will use what they know about the lot to determine the type of warranty they’ll offer on the completed home (this is super important).
If you’re working with a realtor, have them connect you with a few builders they know and trust (and likely have even worked with before). Or let your builder of choice know if you intend to have your realtor involved. Realtors can answer questions pertaining to lot value and the potential resale-ability of the home you’re considering building.
Consider getting at detailed quotes (including information about warranties and timeline) from at least three builders. Make sure you’re comparing like information, and ask your realtor and the builders for further insight, if needed.
Locate the Lot and Plan and Design the Home
At this point, you’ll likely want to locate and purchase the lot for your new home (if you haven’t already).
Then you’ll want to design the home, picking parameters for its size, layout, and style. You’ll want to keep in mind any info you’ve gathered about lot limitations or design decisions that may affect the future resale value of your home.
In Tippecanoe County, you’ll need architectural plans and site plans to even apply for building permits. The architect will help you with:
- Square footage
- Number of stories
- Layout
- Functionality
- Number of beds and baths
Want Some Local Data?
If you’re curious about local construction data, 430 single-family building permits were issued in Tippecanoe County (384), Lafayette (27), and West Lafayette (19) combined in 2019.
According to the Tippecanoe County’s 2019 building permit synopsis, there were 19 more single-family permits overall than there were in 2018 (a total of 430, compared to 411.) While both cities saw an increase in permits (30% decrease for Lafayette and 20% for West Lafayette), the unincorporated county had an increase of 9% in the number of permits issued.
Eleven preliminary plats were heard and approved by APC during the 2019 calendar year, but only two of those 22 were for single-family residential subdivisions.
If you’re thinking about building a home in a subdivision in 2020, consider the following locations: Stonehenge, Hickory Ridge, Three Meadows, Concord Ridge, and Avalon Bluff.
National Data
Zooming out to some national data on new construction: Brian S. Wesbury, Chief Economist for First Trust, says, “Starts have been much higher in recent months due to the unusually mild winter weather throughout much of the country. And while we may see a pullback in the coming months as weather patterns return to normal, we anticipate at least a few more years of gains in home building. Given population growth and scrappage (knock downs, fires, floods, hurricanes, tornadoes…etc), builders have simply started too few homes since the bust. Now it looks like they need to overshoot to make up for lost time. In turn, expect new home sales to follow starts higher.”
This excerpt from The Realtor Magazine pretty much sums it up: “The projected increases still fall shy of meeting the demand for new homes, economists said. A chain reaction is occurring in the market: Fewer seniors are downsizing, which limits options for move-up buyers, forcing them to stay put and starve the market of the starter homes that first-time buyers are desperately seeking. Currently, there is an historically low 1.7 million homes on the market. “Given the historically low number of homes for sale relative to the growing number of households, there is only one outlet to meet demand: new-home construction,” said David Berson, senior vice president and chief economist at Nationwide Economics. “So 2020 should be a good year for new-home construction.”
Time will tell. In the meantime, if you need any help knowing where to start building your own home, please get in touch with me!
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