sold by natasha

Steps to Buying Land and Building a Home – Building a Custom Home

(Vendors below are not endorsed by inclusion. Buyer must interview and make their own decision.)

Common Challenges

  • Not typical for first-time homebuyers, time sensitive buyers, or income restrictions.
  • County, city, & vendor delays dealing with permitting, inspection, delivery, & construction.
  • Finding a buildable lot that doesn’t require a lot of site work before you build.
  • Finding a knowledgeable builder you can trust. Knows local zoning and planning rules.
  • Cost of building materials.

Expected costs

  • Cost for house design plans – $2k on line. A custom design $10k+
  • Realistic price to build $600k+
  • Surveys: varies by the size of the lot ½ acre lot $1500+
  • Inspections – $1k+
  • Cost to build – On average, a minimum $150/sq ft

Type of loan needed (See lender info at the end)

  • Construction to Permanent Loan (Construction to Perm).
  • Type of loan will be a Conventional loan. VA did have one.
  • Not all lenders offer this or are experienced with this loan type.
  • Minimum credit score 680 (varies depending on the lender).
  • Minimum down payment 10% of the total acquisition price – house & land (varies depending on the lender).
  • 2 closings. First, is for the construction. Draws to build the home. Could be a 12 month period. Second, once the home is done, the loan will be refinanced into a permanent mortgage loan.
  • Builder must be approved by the lender.
  • What you are building will also need to be approved by the lender (plans & specs).
  • If you go over – A contingency reserve is included in case you go over. Ex: 10%
  • If you use less – You cannot use the difference.

Easier process if you already have the land

  • The seller has to be willing to wait for you to go through the process of getting your builder approved, submitting specifications for the home, etc. It can be lengthy and all sellers will not want to wait. 

If you already own the land

  • Free & clear, the value of your land will serve as the down payment or part of it or depending on the down-payment amount.
  • If there is a balance on it, when the loan is done for the total acquisition costs, the balance will be paid off and the value (if any) would be applied to the down-payment.

Finding lots

  • Want a developed lot.
  • Undeveloped, raw land, not subdivided, no utilities to the demarcation point or the curb from the county or city, zoning hasn’t been defined.
  • Developed, have been surveyed, some have utilities at the property boundaries (the county/city have run utilities underground to the demarcation point of the lot/curb), zoned.

Land will need to have proper zoning

  • R3 & R5 are most popular.
  • R =Residential. The number = the type of setback. Don’t want commercial or mixed use.
  • Where to find this information. Find out from the county’s planning & development department. Look for zoning requirement for the city.

Prior to making an offer on a lot

  • Choose a lender.
  • Choose builder. See if they have plans.
  • Choose floor plan so you know it will fit in the buildable envelope of the lot.
  • Start getting plans approved.
  • Get due diligence materials from the listing agent. Get any information/documents they have for info purposes. You’ll still do your own due diligence. Ex: previous surveys, soil percolation tests, plans that fit on the lot.
  • Walk the lot with your builder & agent.

During Due Diligence

  • Timing will be about 45 days.
  • Get a site plan survey.  A site plan survey is a combination of a Boundary Survey and Topographic Survey. Site plans are used when making improvements to properties or during new construction. Some municipalities will require this prior to issuing a permit as well.

Typical site plans will show the existing and proposed improvements, topography elevations, tree locations, proposed grading, silt and tree fencing and lot coverage calculations.

Build time

  • Depends on the size of the home, contractors, and supply chain. 9-18 months.

How to find builders

  • Visit your local homebuilders association.
  • In GA – Greater Atlanta Home Builder’s Association’s current membership directory.   https://atlantahomebuilders.com/
  • Click on FIND A MEMBER, then the SINGLE FAMILY CUSTOM BUILDING link, then the ADVANCED tab, and put in a city for your area.
  • Home Builders Association of Georgia https://www.hbag.org/
  • National Site – National Association of Home Builders https://www.nahb.org/
  • Referrals from your agent, family, friends, etc.

Custom Builders

How to see the builders work

  • Ask if they have any homes in progress (spec homes).
  • Ask for list of references.

Where to get plans

Residential Lender Referrals

FYI

  • The FHA, VA and USDA programs all offer one-time- close construction loans in some states.  I don’t believe GA is one that has this available.  So, ask your lender. 
  • The FHA Construction Loan is a onetime close construction loan that allows home buyers to finance the purchase of the lot, the construction costs, and their permanent mortgage after the construction is completed. Not all are available in GA, so ask your lender first.