Building A New Home: The Definitive Guide

BUILDING A NEW HOME:
THE DEFINITIVE GUIDE

Welcome to Building A New Home: The Definitive Guide.

Perhaps you’re about to take that next step toward your dream home. Or maybe you’re just thinking about it and want to know how the entire process works.

In this guide, we will cover creating a budget, picking a location, choosing a builder, and securing financing. Make your dream home a reality!

Here’s the ins and outs of what you need to know about building a brand new home.

 

BUILDING A NEW HOME:
THE DEFINITIVE GUIDE

Welcome to Building A New Home: The Definitive Guide.

Perhaps you’re about to take that next step toward your dream home. Or maybe you’re just thinking about it and want to know how the entire process works.

In this guide, we will cover creating a budget, picking a location, choosing a builder, and securing financing. Make your dream home a reality!

Here’s the ins and outs of what you need to know about building a brand new home.

 

BUILDING A NEW HOME:
THE DEFINITIVE GUIDE

Welcome to Building A New Home: The Definitive Guide.

Perhaps you’re about to take that next step toward your dream home. Or maybe you’re just thinking about it and want to know how the entire process works.

In this guide, we will cover creating a budget, picking a location, choosing a builder, and securing financing. Make your dream home a reality!

Here’s the ins and outs of what you need to know about building a brand new home.

 

CHAPTER 1

CHAPTER 1

CREATING A HOME BUDGET

In this chapter, we will help you narrow down your budget.
What can you afford? How do you determine what you can afford?
What type of mortgage do you need? We cover it all.

CHAPTER 1

CHAPTER 1

CREATING A HOME BUDGET

In this chapter, we will help you narrow down your budget.
What can you afford? How do you determine what you can afford?
What type of mortgage do you need? We cover it all.

CHAPTER 1

CHAPTER 1

CREATING A HOME BUDGET

In this chapter, we will help you narrow down your budget.
What can you afford? How do you determine what you can afford?
What type of mortgage do you need? We cover it all.

HOW MUCH WILL IT COST TO BUILD THE HOME I WANT?

When building a new home, research the average cost per square foot in your region.

To determine how much your home is going to cost multiply the square footage (or estimated square footage) by the average cost per square foot in your area.

This should give you a rough idea of how much the home will cost.

Note: Many homebuilders require at least a 10% deposit up front. This means if your home costs $400,000, you will have to put down $40,000.

It’s also a good plan to determine how much you can afford before determining how much your home will cost.

You don’t want to stretch your finances too thin, become “mortgage poor” – or end up in a dire and panicked financial situation.

HOW DO I DETERMINE WHAT I CAN AFFORD?

Before you even consider building a home, find out if you can finance it. Assess your finances – including your income and expenses.

What is affordable for you and your life?

If you aren’t sure, we recommend booking an appointment with an accountant or another financial expert. They can help you narrow down your options and help you set a clear budget.

Essentially, you don’t want to be drowning in debt by the end of it all and you should likely have a 3-6 month emergency fund for the “just in case.”

If you decide to go it alone and figure out your budget yourself, all the power to you. The following briefly outlines how to make your budget:

HOW MUCH WILL IT COST TO BUILD THE HOME I WANT?

When building a new home, research the average cost per square foot in your region.

To determine how much your home is going to cost multiply the square footage (or estimated square footage) by the average cost per square foot in your area.

This should give you a rough idea of how much the home will cost.

Note: Many homebuilders require at least a 10% deposit up front. This means if your home costs $400 000, you will have to put down $40 000.

It’s also a good plan to determine how much you can afford before determining how much your home will cost.

You don’t want to stretch your finances too thin, become “mortgage poor” – or end up in a dire and panicked financial situation.

HOW DO I DETERMINE WHAT I CAN AFFORD?

Before you even consider building a home, find out if you can finance it. Assess your finances – including your income and expenses.

What is affordable for you and your life?

If you aren’t sure, we recommend booking an appointment with an accountant or another financial expert. They can help you narrow down your options and help you set a clear budget.

Essentially, you don’t want to be drowning in debt by the end of it all and you should likely have a 3-6 month emergency fund for the “just in case.”

If you decide to go it alone and figure out your budget yourself, all the power to you. The following briefly outlines how to make your budget:

1

Plan ahead. Building a home is not a quick decision. It’s years in the making. You have to save up. So, it’s best to make a plan and start setting aside money early on.

1

Plan ahead. Building a home is not a quick decision. It’s years in the making. You have to save up. So, it’s best to make a plan and start setting aside money early on.

Plan ahead. Building a home is not a quick decision. It’s years in the making. You have to save up. So, it’s best to make a plan and start setting aside money early on.

2

How do you know how much you should put away? It depends on your income. How much can you afford to put away? Look at your accounts and your paycheque.

2

How do you know how much you should put away? It depends on your income. How much can you afford to put away? Look at your accounts and your paycheque.

How do you know how much you should put away? It depends on your income. How much can you afford to put away? Look at your accounts and your paycheque.

3

From there, you can calculate how long it would take you to save up for the house size you want or the up-front payment you are willing to make. Make sure you take into account all your expenses when making your plan.

3

From there, you can calculate how long it would take you to save up for the house size you want or the up-front payment you are willing to make. Make sure you take into account all your expenses when making your plan.

From there, you can calculate how long it would take you to save up for the house size you want or the up-front payment you are willing to make. Make sure you take into account all your expenses when making your plan.

4

Furthermore, you want to plan after the fact. There are fees and taxes that come with building a new home. We review these additional fees later on in this chapter. Make sure you are fully aware of what to expect.

4

Furthermore, you want to plan after the fact. There are fees and taxes that come with building a new home. We review these additional fees later on in this chapter. Make sure you are fully aware of what to expect.

Furthermore, you want to plan after the fact. There are fees and taxes that come with building a new home. We review these additional fees later on in this chapter. Make sure you are fully aware of what to expect.

I have the deposit, but how do I afford the rest?

This is where a mortgage comes in.

You will need a progress draw mortgage for financing a new build. And it’s very similar to a regular mortgage.

This is where you will need to talk to a homebuilder or assess house plans.

The lender will need an accepted building contract, house plans, and site plans to determine the home’s value.

When your progress draw mortgage is approved, the builder receives the money in installments.

Often, this is done in 3 different segments.

They receive the first 35%, then up to 65%, and then the full 100%.

During each point that these payments are released to the builder, the lender conducts inspections and submits reports.

The full payment is not released until you have signed a release stating that the final product meets your approval.

WHAT ARE THE MONTHLY PAYMENTS LIKE FOR A PROGRESS
DRAW MORTGAGE?

This entirely depends on you and your lender. Discuss this with them and make sure it works for your budget (as well as your monthly expenses). A mortgage agreement is legally binding so ensure you thoroughly understand all the terms and conditions before you sign it.

WHAT OTHER FEES ARE INVOLVED?

Additional fees may include legal fees, mortgage insurance, appraisal fees, taxes, land transfer tax, interest, furniture, monthly utility bills, and more.

Don’t forget to take these into account when planning your budget and expenses.

You likely don’t want to experience the panic that comes with unwelcome financial surprises.

You may also want to determine whether or not the cost of the land or lot is included in your mortgage agreement.

When planning your budget, this cost could potentially reduce the amount you are able to spend on building your home.

These fees and costs differ from company to company and in different locations.

Find out what the additional costs are in your area. Don’t let them catch you off guard.

I have the deposit, but how do I afford the rest?

This is where a mortgage comes in.

You will need a progress draw mortgage for financing a new build. And it’s very similar to a regular mortgage.

This is where you will need to talk to a homebuilder or assess house plans.

The lender will need an accepted building contract, house plans, and site plans to determine the home’s value.

When your progress draw mortgage is approved, the builder receives the money in installments.

Often, this is done in 3 different segments.

They receive the first 35%, then up to 65%, and then the full 100%.

During each point that these payments are released to the builder, the lender conducts inspections and submits reports.

The full payment is not released until you have signed a release stating that the final product meets your approval.

WHAT ARE THE MONTHLY PAYMENTS LIKE FOR A PROGRESS
DRAW MORTGAGE?

This entirely depends on you and your lender. Discuss this with them and make sure it works for your budget (as well as your monthly expenses). A mortgage agreement is legally binding so ensure you thoroughly understand all the terms and conditions before you sign it.

WHAT OTHER FEES ARE INVOLVED?

Additional fees may include legal fees, mortgage insurance, appraisal fees, taxes, land transfer tax, interest, furniture, monthly utility bills, and more.

Don’t forget to take these into account when planning your budget and expenses.

You likely don’t want to experience the panic that comes with unwelcome financial surprises.

You may also want to determine whether or not the cost of the land or lot is included in your mortgage agreement.

When planning your budget, this cost could potentially reduce the amount you are able to spend on building your home.

These fees and costs differ from company to company and in different locations.

Find out what the additional costs are in your area. Don’t let them catch you off guard.

CHAPTER 2

CHAPTER 2

PICKING A LOCATION

In this chapter, we dive into factors you should consider when choosing the location for your build. It matters more than you might realize. And you want to make sure you are thinking in the long-term.

Where do you see yourself in 5 years? 10 years? What kind of lifestyle do you want?

There are a various factors at play. Let’s take a closer look!

CHAPTER 2

CHAPTER 2

PICKING A LOCATION

In this chapter, we dive into factors you should consider when choosing the location for your build. It matters more than you might realize. And you want to make sure you are thinking in the long-term.

Where do you see yourself in 5 years? 10 years? What kind of lifestyle do you want?

There are a various factors at play. Let’s take a closer look!

CHAPTER 2

CHAPTER 2

PICKING A LOCATION

In this chapter, we dive into factors you should consider when choosing the location for your build. It matters more than you might realize. And you want to make sure you are thinking in the long-term.

Where do you see yourself in 5 years? 10 years? What kind of lifestyle do you want?

There are a various factors at play. Let’s take a closer look!

WHAT SHOULD I CONSIDER WHEN SELECTING A NEIGHBORHOOD?

The house layout matters – but it might mean next to nothing if you don’t like the neighborhood you live in.

Your ideal neighborhood should offer the amenities you require. It should be convenient and easily accessible.

This is where you want to consider your long-term plan.

If you don’t have children now, will you in 5 years? Are there schools nearby? What about parks? If you are a regular gym-goer, is that accessible to you in this neighborhood? Is there a grocery store in close proximity?

Access your activities, hobbies, and needs. If you use public transit, is that readily available to you? Consider where you frequently visit or what you frequently do. Take these things into account when deciding on your neighborhood.

It’s also important to think carefully about the potential for natural disasters or crime. A house on the lake may sound ideal. Yet, if the place is known for annual flooding, it might not be worth it. There are also areas that are more at risk of wildfires. And places known for their higher crime risk. Although, there are many safe and secure locations to choose from. Just keep these things in mind when making your final decision.

Pro Tip: Drive through the neighborhood at various times. Are there traffic issues nearby that might be a problem? Is the road constantly filled with cars on a Saturday for soccer games in the nearby park? These things might not matter right now. But they have potential to cause headache once you’re all moved in.

What should I consider when choosing a lot?

Here are the top things you should review when selecting your lot:

Size

Have you always dreamed of having a spacious outdoor area? You’ll want to make sure there is room for it on the lot you choose – plus room for the house size you desire. Compare different sizes and see how these lots fit your dream.

Orientation

Where does the sun rise and set on the lot? If you want those big windows in the back of your home, you’ll want to know this. It can cause your heating or A/C bills to add up. Take a look at the lot in association with the road. Where will your house be oriented? Is it ideal?

Shape

Lots come in all different shapes and sizes. Does the shape of the lot work with your dream plan? Consider it.

Location

Where on the street is the lot located? On a corner? The end of a cul-de-sac?

Terrain

Is the lot ideal for a house build? Hills can also cause structural damage later on down the line. Make sure the terrain is right for building on (and that it won’t cause issues years later). Your builder can often help you out with this. They have experience and know what’s best for building.

Pro Tip: Find out how much it costs to connect utilities to your home. This is a cost that can surprise some people. Take it into account when choosing your location.

Here’s a quick checklist of questions you can run-through and ask yourself when choosing your location:

Does it have room for all your dream plans? (i.e. pools, trees, decks) Does the Subdivision Agreement allow for your plans?

Is it your ideal landscape? (If you plan on gardening, this will matter!)

Is it close everything you need? (i.e. schools, stores, recreational activities)

Proximity to houses nearby? This may vary depending on whether you are building in a rural or urban area.

Is it close to a busy road? (a busy road = increased noise)

Is it a corner lot? (This is more of a personal preference. Corner lots tend to have more yard space. Yet, they also have the disadvantage of potentially being close to busy intersections.)

What are the zoning laws? (Residential? Commercial?)

Are utilities available? If so, what are they? (i.e. sewer vs a septic system)

Is the lot located on a hill? (hills may require more work.)

Is the landscape or yard something you are willing to put the work into? (This is more so for bigger lots.)

Does it have room for all your dream plans? (i.e. pools, trees, decks) Does the Subdivision Agreement allow for your plans?

Is it your ideal landscape? (If you plan on gardening, this will matter!)

Is it close everything you need? (i.e. schools, stores, recreational activities)

Proximity to houses nearby? This may vary depending on whether you are building in a rural or urban area.

Is it close to a busy road? (a busy road = increased noise)

Is it a corner lot? (This is more of a personal preference. Corner lots tend to have more yard space. Yet, they also have the disadvantage of potentially being close to busy intersections.)

What are the zoning laws? (Residential? Commercial?)

Are utilities available? If so, what are they? (i.e. sewer vs a septic system)

Is the lot located on a hill? (hills may require more work.)

Is the landscape or yard something you are willing to put the work into? (This is more so for bigger lots.)

CHAPTER 3

CHAPTER 3

CHOOSING THE RIGHT BUILDER

The majority of people don’t know how to build or have the necessary resources to build a home. And that’s absolutely okay. Homebuilders prepare the lot for the build, obtain the proper permits, and construct the home - so you don’t have to. However, like any profession - there are good builders and there are not-so-good builders. In this chapter, we review how to choose the right builder.

CHAPTER 3

CHAPTER 3

CHOOSING THE RIGHT BUILDER

The majority of people don’t know how to build or have the necessary resources to build a home. And that’s absolutely okay. Homebuilders prepare the lot for the build, obtain the proper permits, and construct the home - so you don’t have to. However, like any profession - there are good builders and there are not-so-good builders. In this chapter, we review how to choose the right builder.

CHAPTER 3

CHAPTER 3

CHOOSING THE RIGHT BUILDER

The majority of people don’t know how to build or have the necessary resources to build a home. And that’s absolutely okay. Homebuilders prepare the lot for the build, obtain the proper permits, and construct the home - so you don’t have to. However, like any profession - there are good builders and there are not-so-good builders. In this chapter, we review how to choose the right builder.

WHAT IS A GOOD STARTING POINT TO FIND BUILDERS IN MY AREA?

The first thing you will need to consider is who owns the lot? Builders own sets of lots in certain subdivisions and when purchasing a specific lot you will need to determine which builder own it. There have been times when one builder will allow another builder to purchase the lot and build for a client, however, that is something that would have to be discussed prior to any agreements being signed.

References from friends or family is always best. However, Google is also a great option. If you don’t have any great references, do your research! Check out the builder’s reviews. What have previous customers said about their work? Look through their portfolios. Do the homes match up with your style? What about their floor plans? See if you like their previous work.

While researching, you should also try to check out their credentials. Are they qualified? Certified? Insured? Find out.

SHOULD I MEET WITH THEM IN PERSON?

Absolutely! Meet with multiple builders. Scout out your options. And ask questions. Do they answer them? And do they answer them well? A good builder will provide a thorough answer. This is also an opportunity to ensure that your communication styles line up. Do they listen to your vision and goals? Or is it their way or the highway? They should take into account your priorities, opinions, and ideas. After all, you are paying for it and you are the one that has to live in the house once it is built.

HOW DO I MAKE THE FINAL DECISION?

We’ll help you out here. If you agree with the following statements, you may have found your match!

WHAT IS A GOOD STARTING POINT TO FIND BUILDERS IN MY AREA?

The first thing you will need to consider is who owns the lot? Builders own sets of lots in certain subdivisions and when purchasing a specific lot you will need to determine which builder own it. There have been times when one builder will allow another builder to purchase the lot and build for a client, however, that is something that would have to be discussed prior to any agreements being signed.

References from friends or family is always best. However, Google is also a great option. If you don’t have any great references, do your research! Check out the builder’s reviews. What have previous customers said about their work? Look through their portfolios. Do the homes match up with your style? What about their floor plans? See if you like their previous work.

While researching, you should also try to check out their credentials. Are they qualified? Certified? Insured? Find out.

SHOULD I MEET WITH THEM IN PERSON?

Absolutely! Meet with multiple builders. Scout out your options. And ask questions. Do they answer them? And do they answer them well? A good builder will provide a thorough answer. This is also an opportunity to ensure that your communication styles line up. Do they listen to your vision and goals? Or is it their way or the highway? They should take into account your priorities, opinions, and ideas. After all, you are paying for it and you are the one that has to live in the house once it is built.

HOW DO I MAKE THE FINAL DECISION?

We’ll help you out here. If you agree with the following statements, you may have found your match!

They have good reviews.

They have credentials or qualifications.

They welcome questions and answer them thoroughly.

Their previous work is quality.

Their previous work matches your style.

The locations they build in work for you.

They communicate clearly and effectively.

They have references (from previous customers).

They are willing to show you their previous work.

If it doesn’t feel right, it might be best to keep hunting. It’s not worth the hassle or headache working with a builder that you don’t mesh with or that has obvious red flags.

In summary…

Research multiple builders.

Meet with multiple builders.

Make a decision based on your research and meetings.

Let the building begin!

They have good reviews.

They have credentials or qualifications.

They welcome questions and answer them thoroughly.

Their previous work is quality.

Their previous work matches your style.

The locations they build in work for you.

They communicate clearly and effectively.

They have references (from previous customers).

They are willing to show you their previous work.

If it doesn’t feel right, it might be best to keep hunting. It’s not worth the hassle or headache working with a builder that you don’t mesh with or that has obvious red flags.

In summary…

Research multiple builders.

Meet with multiple builders.

Make a decision based on your research and meetings.

Let the building begin!

CHAPTER 4

CHAPTER 4

SECURE FINANCING

We briefly outlined the mortgage you need and how it works above. In this chapter, we are going to dive into a bit more detail about the process of securing your financing. What can you expect? How does it all work? If you’ve never taken out a mortgage before, it’s all kind of a mystery. So, let’s find out.

CHAPTER 4

CHAPTER 4

SECURE FINANCING

We briefly outlined the mortgage you need and how it works above. In this chapter, we are going to dive into a bit more detail about the process of securing your financing. What can you expect? How does it all work? If you’ve never taken out a mortgage before, it’s all kind of a mystery. So, let’s find out.

CHAPTER 4

CHAPTER 4

SECURE FINANCING

We briefly outlined the mortgage you need and how it works above. In this chapter, we are going to dive into a bit more detail about the process of securing your financing. What can you expect? How does it all work? If you’ve never taken out a mortgage before, it’s all kind of a mystery. So, let’s find out.

SEEK OUT PRE-APPROVAL

Don’t wait. You’ve determined your budget. Find out if your eligible. Once you find out you are, you can get that good interest rate locked in.

SHOP AROUND

Compare pricing and interest rates. Who has the best deal? Why? Are there hidden fees? Do your research. Like getting your perfect builder, shop around. Don’t just go with your own bank. Consider mortgage brokers. And don’t panic if you get rejected – just because you didn’t qualify with one lender or bank, doesn’t mean another won’t take you.

KNOW WHAT IMPACTS YOUR LENDING POTENTIAL

The mortgages that are offered to you are based on your debt, credit, income, assets, and other elements. It’s likely a good idea to talk to someone about how you can up your chances of getting a good deal on your mortgage. For instance, paying off your debts beforehand can substantially put you ahead of other players in the game.

ONES YOU SIGN IT, IT'S A DONE DEAL

Thoroughly look over any documentation before you sign it. It’s legally-binding. If you have a lawyer, get them to run through it with you before you put pen to paper.

ESSENTIALLY, THE PROCESS GOES AS FOLLOWED:

1

Step 1:

Plan Your Budget (consider the help of a professional here!)

1

Step 2:

Shop Around For Mortgages

1

Step 3:

Get a Pre-Approval

1

Step 4:

Find Your Builder

1

Step 5:

Solidify House and Site Plans

1

Step 6:

Secure Financing - Get That Mortgage

1

Step 7:

Your Build is Underway!

1

Step 8:

Enjoy Your New Home.

NOTE:

These steps may vary based on your
location and financial status.

Step 1:

Plan Your Budget (consider the help of a professional here!)

Step 2:

Shop Around For Mortgages

Step 3:

Get a Pre-Approval

Step 4:

Find Your Builder

Step 5:

Solidify House and Site Plans

Step 6:

Secure Financing - Get That Mortgage

Step 7:

Your Build is Underway!

Step 8:

Enjoy Your New Home.

NOTE:

These steps may vary based on your
location and financial status.

Plan Your Budget (consider the help of a professional here!)

Shop Around For Mortgages

Get a Pre-Approval

Find Your Builder

Solidify House and Site Plans

Secure Financing - Get That Mortgage

Your Build is Underway!

Enjoy Your New Home.