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Benefits of Building a New Home
The benefits of building a new home add up fast with today's advanced methods and technologies:
- Designed for You. Search from over 27,000 plans and find the one that's just right for you. Or create your dream home by customizing any of our plans to your exact specifications.
- Greater Safety. Build in safety features to meet your family's needs. Newly built homes are constructed to stricter safety standards than older homes and have hard-wired smoke detectors with battery-powered backup. Wiring systems have been improved, and new homes have more outlets.
- Easier Maintenance. Pick out materials and products that make life easier and require less maintenance such as siding, window, and trim materials that never need painting. New roofing materials are denser, longer lasting and many have fire-retardant features. See our Building Resources section for ideas and links to building products and services.
- Greater Energy Efficiency. In today's environment it's important to make your new home as Green as possible. There are many ways to save money and energy while helping conserve the environment. Improved heating and cooling systems, more water-savvy plumbing fixtures, and better insulation techniques are just some of the items that offer efficiencies.
- Structural Strength. You can take steps to improve your homes integrity when building in areas subject to inclement weather or earthquakes. Builders now use extra bracing and framing systems to better withstand exterior stress. Soils can be tested and foundations engineered to resist or accommodate movement. New drainage devices collect rain from gutters and slopes, then deliver water directly into storm drains. Roof and floor trusses enhance structural strength and create new interior design options.
- Better Health. Today, asbestos and lead have been completely eliminated from materials used in new construction. Formaldehyde emissions from products such as particleboard and plywood have been substantially reduced as well. And new control systems are available for areas where radon could be a potential problem. Low- and no-VOC (volatile organic compound) paints are now widely available.
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Construction Loan Options
Building plans and market conditions can change before a new home is complete. Construction costs and mortgage rates may go up or down while your home is taking shape. To meet your needs and accommodate a changing rate environment, our Construction/Perm Advantage program offers two options for the interim financing of your new home.
Prime Pricing - Our variable rate, interest-only payment options offers you an interest rate that is based on the Prime Rate as published in The Wall Street Journal. As the Prime Rate changes, your interest rate automatically follows, and your monthly payment will adjust accordingly.
Single PriceSM - Our fixed-rate, interest-only payment feature offers the same rate on both your construction loan and permanent financing. Plus it can help you respond to rising interest rates for up to two years.
You may not build equity with an interest-only loan, unless you make voluntary principal payments during the interest-only period.
Please discuss these options with your Wells Fargo Home Mortgage consultant to determine which is the best option for your situation.
Stages of the construction loan process
Whether you just decided to build, or already have plans in hand and a builder lined up, it's a good idea to talk to a Wells Fargo Home Mortgage consultant early in the process. Our exclusive Single Source™ capabilities mean you'll enjoy seamless access to in-house new-construction lending specialists who can help you get your Construction/Perm Advantage financing in place. If you're in the initial stage, we can give you a PriorityBuyer™ loan preapproval decision, which confirms your purchase power and lets you know how much you will be able to pay for your new home.
Generally, there are seven steps for financing the construction of a new home using our program.
1. Initial Stage
You've probably Searched for plans you like, and maybe even met with a builder. Even though you don't have much finalized, now is a great time to get your financing in place, so Apply Now.
2. Application
Your plans are probably starting to solidify. You may have a builder chosen at this point, and you're ready to apply.
3. Approvals
Submit your application with supporting documentation such as income, asset and down payment verification. We'll also get the final plans and specs so that we can order an appraisal. The complete package will be submitted to loan approval.
4. Construction Closing
After all the necessary approvals, you will close on the loan that will finance the construction of your home. A settlement agent will give you specific instructions about the amount you'll need to bring to closing, and in what forms. As soon as you close on the construction loan, you may begin building.
5. Draw Process
During construction, you and your builder will request draws from the construction fund for work that has been completed.
6. Completion of Construction
A final inspection will determine that the construction on your home is complete. You'll also need to get a Certificate of Occupancy (or its equivalent) from your local authorities.
Your construction portion of the loan will transition into your permanent loan product.
7. Move In!
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Documentation for a construction loan
Here's the kind of information you should have at hand when you apply for your construction loan. This is a general list, and I'll let you know of any additional information I may need to make your loan application complete.
Salaried Borrowers
Pay stubs for the most recent 30-day period (including a year-to-date summary) for each of the borrowers on the loan
Most recent W-2 statements for all borrowers
Relocation letter on company letterhead, if applicable
Self-Employed Borrowers
Complete signed tax returns for the last two years, including schedules and statements. If incorporated, personal and corporate returns should be provided
A copy of an extension to file, if applicable
Year-to-date profit and loss statement, if beyond June 30th
Deposit Verification
All pages of checking and savings account statements from the most recent 30-day period
All pages of asset account statements, including money market funds, mutual funds, stock accounts, IRAs, CDs, etc., from the most recent 30-day period. Please note that Internet screen prints are generally not acceptable
Gift letter, if applicable
Evidence of the sale of your previous home, if applicable
Verification of large deposits
Miscellaneous Borrower Documents
Any divorce decrees, child support agreements, or separate maintenance agreements if alimony or child support is either paid by any borrower on the loan or received by any borrower on the loan and is used as income
Written explanations for any credit issues that appear on your credit report
Copies of any leases and two years of federal tax returns on any rental properties you own
Construction and Builder Documents
Construction plans and specifications
Fully executed Purchase/Construction contract accounting for all work. This may involve separate bids and/or contracts if work is not included in the contract
Signed National Builder Division Construction-to-Perm Program Disclosure, which will be mailed to you within three days of application and needs to be returned promptly
HUD1 Settlement Statement from the purchase of the land, if the purchase occurred within the past 12 months.
Name, phone number and address of the builder
Name and phone number of your preferred settlement agent (i.e., title company, attorney, escrow agent, etc.)
Course of Construction insurance
Certification for any private well or septic system
Foundation survey (In most states, this can be handled by your title company). Either you or the builder is responsible for ordering this survey before the first payment draw is released. Its cost is usually not covered in your closing costs.
Verification of deposits to your builder and/or land seller, such as cancelled checks or a copy of a certified check
Ordering the Appraisal
The lender will order a full appraisal of the proposed property based off of the chosen lot as well as the final plans and building specifications. Any post-appraisal change orders may cause a delay in construction loan closing and the start of construction.
All conditions (such as debt reduction or additional documentation) for your permanent loan must be satisfied prior to the close of construction.
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Construction Cost Breakdown
Construction Cost Breakdown: Also known as Line Item Cost Breakdown is an itemized breakdown of all the costs of your home construction project. Most construction loan lenders will require you to complete a cost break down as part of their application package. Most construction loan lenders, construction loan companies, or banks have their own forms but all with similar information. Your General Contractor should be able to complete this form. This form will break down the home construction project into related sections such as Site Work, Electrical, Concrete, Framing, Plumbing etc. and their projected costs. These projected costs should add up to the Total Cost of Construction. This is a good tool for budgeting and tracking projected costs versus actual cost. Here is an example of a Construction Loan Cost Breakdown form PDF.
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Cost-To-Build Estimate
Cost-To-Build Estimate: This is an estimation of the cost of construction. Ordering a Cost-to-Build is a good way to get a rough idea of the home's cost and a way to help you deside what loan amount to apply for.
What items are included in a Cost-to-Build Report?
The construction materials, labor and overhead data in our reports are very comprehensive and include the items below. It's important to understand that the quality of construction you choose significantly affects the resulting report. Be sure to check out the assumptions we make for the level of quality you choose when preparing your report.
Foundations: Concrete that is used for the footings, foundation walls, basement floor slab (if required), garage floor slab, as well as any concrete columns that may be required for post/pier foundations types.
Heating/AC: Includes furnace, central air conditioning unit, and all metal ductwork needed to provide hot and cold air for the entire home. The number of furnaces and air conditioning units is determined by the total square footage of the home.
Rough Framing: Wood framing used to build the structure of the home. This includes all walls, floor joists, and roof trusses. It also includes any plywood sheeting used on the top of roof trusses and floor joists, as well as outside of the exterior walls. Also includes any insulation in the walls and ceiling.
Floor Covering: Includes any material used to cover any floor in the home. It also includes any needed sub-flooring material and carpet pads. A standard ratio of 80% carpet and 20% Vinyl Tile, unless the plan indicates some other material, such as stone or hardwood flooring should be used.
Exterior Finish: The finish material that is added to the outside of the exterior walls of the home. This can include any combination of brick, stone, stucco or siding.
Appliances: The electrical appliances typically supplied by the builder when a home is built. This usually includes a range, dishwasher and garbage disposal. If additional appliances such as refrigerators, freezers, microwaves, and trash compactors are chosen in the system, these will be included as well. (They are not usually selected.)
Windows: Windows for the home, including any specialty, accent or transom windows, as well as mirrors that are normally installed in the bathrooms. The material for the window frame varies depending on the size and quality of the home, from aluminum to high-grade wood horizontal sliding windows.
Interior Finish: Anything that covers the wooden structure of the walls and ceilings, and brings the interior of the home to a finished state. This includes all sheetrock, drywall finishes and paint. Kitchen and bathroom cabinets are also included in this section. 100% paint finish is selected for all walls and ceilings.
Roofing: The material that is installed on top of the plywood sheeting above the roof trusses. This is usually some form of shingles but could be metal panels, copper and gravel style roofs.
Electrical: All electrical options for the home. This includes rough wiring that is installed prior to any finish, all outlet and lighting fixtures and the main connections from the available power source to the home.
Plumbing: All plumbing options for the home. This includes all rough plumbing installed prior to any finish, plumbing fixtures for the bathroom, kitchen, and utility rooms, a water heater typical for the home, and the main connection of the water and sewer lines.
Special Features: These options are selected by default depending on the size and quality of the home. They include the following: Water Softener, Central Vacuum System, Fire and/or Burglar Alarms Systems, Intercom Systems, Programmable Lighting, Home Management Systems, Fire Sprinkler Systems and Solar Panels, swimming pools, hot tubs, fountains, and home theater systems that would be included in this category.
What items are not included in a Cost-to-Build Report?
Houseplans Cost-to-Build Reports do not include:
- Site preparation of any kind
- Removal of existing structures
- Purchase of the lot
- Preparation of the lot
- Flatwork (like driveways
- Detached garages or other structures
- Landscaping
- Modifications/Customizations to the house plan
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Links:
https://www.wellsfargo.com/mortgage/rates/
https://www.wellsfargo.com/mortgage/buy/
https://www.wellsfargo.com/mortgage/refinance/
http://en.wikipedia.org/wiki/Construction_loan
http://en.wikipedia.org/wiki/Bridge_loan
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