Construction Loans #3: Your Builder's Cost Estimate

By Jennifer Hermes

Your builder makes a construction cost estimate based on your house plan and finish requirements. Plan 132-207

You will need to work with a builder to outline what you want in the house and to prepare a cost estimate for the total cost of building your new home -- the lender will need that estimate in order to approve the loan, explains Scott T. Charpentier, founder and owner of Fort Collins Mortgage LLC in Fort Collins, Colorado.  

Your builder will need the house plan, and you will work together to nail down all the specifics of your home, such as whether you want the house plan modified at all to add elements like skylights or higher ceilings, what kind of built-in systems you might want (security, sprinklers, central vacuum system, etc.), what type of heating and cooling, what kinds of fixtures and finishing (cabinets, floors, window, etc). All of this information will help the builder provide the potential lender with an accurate cost estimate. It will also, incidentally, solidify in your mind exactly what you want and expect your house to be.

This process is relatively straightforward, says Scott, but there is one thing you should be aware of. Inside the body of the builder contract, will be information on specific materials that will be used to build the home, including things like granite countertops or cherry cabinets, he explains. The builder will use model numbers, such as model FFHT1826PS. “The problem comes when people don’t understand what the model number refers to. It could be a cheaper item than what you want.” You will want to make sure the model number the builder includes matches the items you agreed on.   The final builder contract will include the cost of construction (how much the house will cost to build) and the description and cost of the materials that will go into the building of the house. Once that is complete, you’ll bring it to the lender and apply for the loan.

Our next article will cover the actual loan application process.    


10/07/2013