Building a new home can be confusing and overwhelming. Ask yourself these 10 question to help save you money, time, and aggravation.
How will you pay for the home you build?
This is probably one of the first and most important questions that you will ask. If you are like most people, you will most likely finance your home. What type of financing is available to you? A Federal Housing Administration (FHA) loan is great for borrowers will less than perfect credit and little money for a down payment. You can receive the same interest rate as borrowers with good credit and are required to pay a down payment of only 3%. An FHA loan insures 100% of the loan and will allow you to finance closing costs. Applicants for conventional loans require excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. In addition, conventional loans cover only 80% of the loan. As a result, if you put down less than 20%, you are subject to private mortgage insurance (PMI). PMI is mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. PMI payments are usually rolled into your monthly mortgage payments. If you are a veteran, ask about Veterans Administration (VA) loans. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans.
Will the home you build be a part of a homeowner's association?
Most town home developments and many newer single-family subdivisions have homeowners associations (HOA), which are usually created when the development is built. A homeowners association is a mandatory membership organization comprised of homeowners in a particular subdivision, planned unit development (PUD), or condominium. An HOA is a legally recognized organization, responsible for enforcing any covenants, conditions & restrictions (CC&Rs) that apply to the property. For example, CC&Rs may tell you how big your house can be, how you must landscape your yard, or whether you can park a vehicle with advertising on it in your driveway. If the home you build is part of a homeowners association, carefully read all the HOA documentation. HOAs can and often do enforce their CC&Rs. Tearing down the 10 foot chain link fence you installed because only 8 foot wooden fences are allowed is a costly price for ignorance. If the CC&Rs are too restrictive for your liking, you may want to reconsider where to build your home.
What type of future development will occur near the home you build?
The area in which your new home is built today may look very different in a few years. Will the quiet street with twenty or so homes and little traffic become the main road leading in and out of a much larger and busier neighborhood? Is there a major retailer or a shopping center planned for your area? To consider how future development may impact your lifestyle, find out what other developments are planned for the community. Ask your builder in addition to checking with the local county government planning office.
What will and will not be near the home you build?
Depending on your life style and situation, it may be essential to you to be near certain facilities. You may have children and want to have a school nearby, possibly one your children can walk to. Quick and easy highway accessibility may be important if you drive to your job. How vital is the need for convenient public transportation? Where are the churches, shopping centers, and recreation facilities? Additionally, be aware of what you don't want near you home. Proximity to an airport or train station could be a nice convenience. However, you may find the noise of airplanes and trains jarring and tiresome. You may be living in the area for a considerable time. So, take the time to get to know your future neighborhood.
Will your home be built to accommodate your needs regardless of age or physical condition?
You may see yourself living in the home you build well into your "golden years". Yet, as you age, you might have to give up your home and neighborhood prematurely because standard housing cannot meet your needs. Or, your home may no longer accommodate your needs if you were to become physically disabled. Ask your builder about using universal design principles to build your home. Universal design is the creation of products and environments meant to be usable by all people of all ages and abilities to the greatest extent possible. The intent is to simplify life for everyone by making more housing usable by more people at little or no extra cost. For example, standard but wider doors can be selected, steps at entrances can be eliminated, and stair landings can be built big enough to hold lifts.
What options and upgrades will you chose for the home you will build?
Your builder will probably offer a wide range of options--designer kitchens with stainless steel appliances, luxury bathrooms with saunas and whirlpools, and floors made of wood or tile to name just a few. Take the time to review the options and upgrades that your builder provides and consider which are worth paying for over the life of the loan. For example, given the choice between upgrading a cosmetic improvement such as decorator tiles and granite counter tops in the kitchen, and upgrading your heating/cooling system which will probably save you money on utility costs over the long haul, the heating/cooling system may be the wiser choice. What will the new home warranty cover on you new home?
Most local municipalities require new home warranties. A new home warranty protects you from defects and unexpected repairs for mechanical systems and appliances that are not covered by your homeowner's insurance. The coverage is for a specific time period and does not cover the home's structure. Often, part of this warranty is covered by the manufacturers of the new home's appliances and mechanical systems. Ask to see the warranty for your new home prior to settlement. Determine who (the developer or the manufacturer) will provide service, specifically what is covered, and for how long coverage is provided once your new home is finished. Also, check if your developer extends the warranty for specific major components such as the roof, floors, and fireplace.
What public services are offered for you new home?
Verify if such services as water, sewage, trash pickup, and recycling are available as public services. If there is no public water and/or sewage system, you will have the added expense of land preparation, installation, and maintenance of a well for drinking water and/or a septic system for wastewater. Do you have to pay for trash collection and recycling? Also, don't forget to ask how the mail is delivered. Rather than have the mail delivered to your door, many new communities have cluster boxes where you pick up the mail yourself.
Will the home you build be on a flood plain?
Building a home on a flood plain (land bordering a river, creek, lake, stream, or other open waterway and subject to flooding) can come with considerable risks. There are two types of flood plains""100 year and 25 year. Property located in a 100-year flood plain has a 1-in-100 chance in any given year of flooding. There is a 1-in-25 chance in any given year for property located in a 25-year flood plain. If you build in a 100-year flood plain, make sure you or your developer file the appropriate permits. In addition, your home must be elevated above the base flood elevation and an engineering evaluation will be required to determine the impact to upstream properties. If the home you build is considered by a mortgage lender to be in the 100-year flood plain, you will require flood insurance in order to obtain a mortgage. To find out if your land is on a flood plain, contact the county Engineer's office.
Will you choose a stick-built home or a modular home?
You may be more familiar with the conventional or stick-built home, which is constructed piece by piece on the building site. However, it is not the only way to build your home. Today, you can choose to have a modular built home. A modular home is constructed mostly in a controlled factory setting and can be built in as little as two weeks. They are transported to your home site; then, placed on a pre-made foundation, joined, and completed by your local builder. Yet, the quality is in no way inferior. Both stick-built homes and modular homes are constructed to meet or exceed the building codes that are required at the specific location. Which building style will work best for you? Modular home may cost less, due to no weather delays and a reduced threat of job-site theft and damage. Stick-built homes may offer you more flexibility in design. Consider your needs and desires and ask yourself, which will work best for you.
