Hey guys! I’m back with another home post and today I’m talking about some of the very first steps in our custom building process, picking a lot and budgeting the house. A big shoutout to my hubby for helping me write this post!
Picking a lot
You typically have two options when picking a lot. You can either find a new development where the lots are already cleared and ready to be built on or you can find an existing homesite and demo or remodel the existing property. We wanted to stay very close to our current neighborhood (love that city life!) which meant that we would have to find an existing property to demo. The Sedgefield area of Charlotte is quickly becoming one of the hottest areas in Charlotte for new construction. It offers the convenience of being close to Uptown/SouthEnd/light rail while not being quite as expensive as Dilworth even though they are right next to each other.
The main thing you need to consider with your lot is that the house you design will fit within the lot. This means learning what the lot dimensions and setbacks are for your lot (setbacks are how far from the property lines your building can be). The lot we bought was only 65 feet wide with 5 foot setbacks on the side which meant our house could have a maximum width of 55 feet. For us, we really wanted an attached garage and this width allowed us to do that while other lots in our area are often narrower, only allowing for a detached garage in the back. I don’t know if everyone does it this way but I think it’s best to secure a lot first then hire your architect and start designing the house. The lot can definitely affect the design so make sure to consider those factors.
Budgeting a house
There are many many many factors that go into coming up with a budget for your house, it’s not as simple as just having one number to build the house. We bought a property with an existing house on it so not only did we buy that house/property but we also had to factor in the demolition of the existing house and removing some trees from the property that would be in the way of the new house.
When you are working with your builder you also have to consider if they are factoring in costs for things besides just the house itself. Things like a driveway, fence and landscaping all have to be considered. We were also considering putting in a pool but have decided to wait until the house is done before making that decision. Financing the building of a house is a little more complicated, and you guessed it, expensive, than buying an already built house. Construction financing tends to have a slightly higher interest rate that a traditional home loan and there aren’t as many loan options for construction loans. Some banks won’t do a 30 year fixed loan and only offer adjustable rate term loans. Full disclosure- Ryan handles all the complicated financing details! You will also be paying interest on the loan during the construction of the house. Here is an example of how that all works, these are NOT our numbers but we just wanted to use round numbers for simplicity’s sake.
Let’s say you have a million dollar loan with a five percent interest rate and the house is going to take 10 months to build. After 2 months the builder has 20% of the house done. You will now start paying interest on $200,000. You will only pay interest on the loan and don’t normally start paying off the principal until after a year or after the house is fully completed. After 4 months the builder has 40% of the house complete, you now start paying interest on $400,000 and so on until the house is fully completed. So when you are coming up with your budget plans you also have to factor in that you will be paying some interest on the house while it is under construction on top of paying your normal mortgage or rent.
I know that was a lot of info (and truly not the most exciting) but I just wanted to give a glimpse of the planning that goes into finding and securing a lot for a new build. For my next home post, I’ll be sharing more about the architect and design process. This part was really fun to see come to life (at least on paper)! If you have any specific home building questions, feel free to email me at firstname.lastname@example.org!