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Construction Loan Pitfalls

When you and your family decide it's the right time to build your dream and start looking for the right builder, architect and construction loan lender you are probably excited and looking to build your home as quickly as possible.

However there are a few items that you will want to watch out for when putting together your Custom Construction project. Let's talk about the Architect, Builder and Lender in that order.

When looking for the right Architect keep in mind that an architect as any third party construction professional will charge you according to how busy they are. If they are very busy and are receiving more business than they can possibly handle they will charge you a premium for their time. However there are many architects out there that will do an amazing job in putting together your plans that are not as busy as the most popular one out there.

You will find the same thing regarding your builder. The more projects he has going on the more he is going to charge you. If he or she is very busy they are not going to be hungry for more business. They will probably be semi-competitive but not like you are going to want if you are shopping for an affordable and quality builder. When my wife and I built our home we found that that there was a discrepancy as high as 40% between different builders. We finally ended up going with the builder that was on the lower end and who had the most positive referrals. By doing this we saved several hundred thousand dollars and ended up with the exact dream home we wanted. Be very careful when deciding on your builder. Also please don't make the mistake of only talking to one or two references. Talk to several. That way the builder or any third party professional for that matter can't really control his referral sources. If you talk to maybe 6 people per builder you will find that you are going to know what type of service you are in for. Trust me, it's worth your time.

The right construction lender is the last but probably most important decision you will make. Not only will you find a difference in closing costs of 2 to 3% of the entire loan amount but the timing of your project will suffer greatly if you go with an inexperienced or perhaps overly strict construction lender. Make sure you spend the same time in due diligence talking to multiple people the lender has worked with to ensure that you will be getting the proper terms and treatment during the financing period. My recommendation is to find a lender that isn't charging any points and who has a rate as least as low as par or even lower. They are out there!

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