Construction - Planning, Process, and Pitfalls
by Meagan Walters, Horizon Farm Credit Loan Officer
Ready to start building your dream home, but overwhelmed on where to start? Farm Credit is here to help! Our lending team are the experts in construction loans, and are ready to help you build your dreams.
The construction process can be extremely lengthy, from perc tests to final inspections, and we want you to feel supported at every step along the way. Read below to learn more about construction planning, the process, and pitfalls to avoid while on your journey
Got Land? Get Financing.
Once you’ve landed your ideal piece of land for your future build, how do you get started on your construction project? Throughout the entire process, you will need to work closely with both your lender and a builder. We recommend starting with your lender to ensure there is a good loan option for the type of home you want to build. Connect with a trusted lender up front to determine a pre-qualification amount so you can budget accordingly for your project. Your lender can put together some initial numbers to give you a better idea of how much you can afford, if there is usable equity in the property, and how much you may need up front for down payment, closing costs, and cost overruns.
Partner with a Builder You Trust
After a conversation with your lender, it’s time to seek out a reputable builder. Start by asking them for their portfolio or references from previous customers. Ideally, you will want to meet with your builder in person to discuss your project in detail. Make sure they communicate well with you and can answer any questions you have. Your builder can help with decisions on the type of home to build, the placement of the home on the property, utilities that will be needed, required tests and permits, and overall cost of the project.
Once you’ve selected your builder, consider the contract, scope of work, and timeline for both the builder and your lender. Some builders offer turnkey contracts that cover every aspect of the build, while other contracts may leave you responsible for things like foundation/excavation, septic, or the well. Contracts that do not address all aspects of construction can create issues down the line and add additional costs to the project. It’s important to understand your contractor’s timeline and project pipeline to ensure your build can be completed in a timely manner that aligns with the lender’s requirements and your expectations.
After ensuring your builder can meet your timeline, your lender is going to need a signed builder’s contract, proposed disbursement schedule, plans, and specifications of the home, as well as any estimates for work outside of the main contract. You will need to work with your builder on these items before applying for the construction loan. Your lender can provide the needed application and list of required financial documents, as well. We recommend applying for the loan at least 60 days prior to when all parties want to start construction.
We know that building is a big step and an exciting process for you and your future. We are here to help you every step of the way and be a resource for you. Click the link below to get in contact with your local loan officer and get started on your prequalification today!