How to Build Your Own House

If you want to save money on new-home construction, build your own home. The process is relatively easy. However, you should familiarize yourself with the steps before making the decision to build. Hence, you won’t inadvertently skip a crucial step, and you’ll enjoy a smooth process.

Difficulty: Moderate

Instructions

1. Improve your chances of qualifying for a loan. Getting a new-construction home loan with bad credit is difficult. The mortgage industry has changed, and lenders have tightened their guidelines. If your credit score is less than 620, you may not qualify for financing. Get a copy of your credit report. Check for inaccuracies, pay your bills on time and reduce your debt balances.

2. Get your personal finances in order. Borrowers with excellent credit can obtain a new-construction home loan with no money down. However, if your credit score is less than 700, many lenders require a 3 percent to 5 percent down payment. Keep track of your spending and develop a money savings plan.

3. Learn about different home loan programs. You'll need to contact a mortgage broker or lender for a new-construction loan, which finances the land and the actual construction process. Lenders and brokers offer fixed rate loans, no money down loans, no-documentation loans for self-employed and 103% financing. Some lenders and brokers also market risky adjustable rate and interest-only loans. Be careful and learn the potential risks.

4. Get loan quotes. Choosing the right construction loan is imperative. Get quotes from lenders and brokers, and pick the loan that features the lowest rate and the best terms. Once you've chosen a finance option, the lender opens a home construction line, which pays for building materials and contractors.

5. Located a land. You can build your new home within a subdivision or purchase land that's zoned for residential construction. You can find property on your own, or with a real estate agent.

6. Find a home builder. Since a home developer or builder will construct your home, you’ll need to speak with different companies. The builder coordinates the entire construction. They get the necessary permits, and they’ll hire subcontractors such as the electrician, plumber and drywaller.

7. Sign the contract. Before the project begins, you’ll have to sign a contract. Thus, you’re obligated to purchase the home upon completion. The contract includes information such as the final sale price, and any negotiated terms. For example, the builder may agree to pay all closing costs.

8. Pick your floor plan and home designs. Once you’ve chosen a developer, you’ll have to pick a floor plan. Be sure to pick a plan that's within budget. Next, you'll need to select your designs. You can pick standard builder designs, or customize the home to include marble counter tops, tile floors, wall paper, hardwood floors and stainless steel appliances

9. Inspect and schedule a walk-through. Once the home construction is complete, your lender hires an inspector who reviews the builder's work and ensures the home adheres to safety codes. If the home passes inspection, you'll have the opportunity to complete a final walk-through, to make sure the home is built to your satisfaction.

10. Attend the closing. The final step is the loan closing. This is where you sign the loan documents, pay settlement fees and receive the keys to your new home.

Tips & Warnings

• Some mortgage lenders have closed their sub prime loan departments, while others continue to give mortgage loans to bad credit applicants. Subprime loans have high interest rates, unfavorable terms and most applicants can't afford the monthly payment. Build a home when you're able to qualify for a prime loan.

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on 11/25/2008 To really understand the process of Building Your Own Home, www.byoh.com has a wealth of FREE information.