These are the basic steps in deciding whether to proceed with your building project.
1. Make a budget.
2. Deduct land cost.
3. Determine what size and style of house you can afford.
4. Find house plans that meet these criteria.
5. Determine the cost to build this particular house.
6. Get an appraisal on the value of the finished house and land together.
7. Now you can make your decision.
Steps in Building a House –A Budget is the First Step
Making a budget has to be your first step, even if you are a billionaire!
Bill Gates had a budget when he built!
Making a budget for building or buying a home is simple. Don’t complicate it. The formula is: Cash plus Loan = Budget!
First, add up all your available cash and any assets you want to convert to cash for your dream home.
Second, determine your maximum “borrowing power.” These two steps determine how much you can spend. It’s that simple.
The first step needs no explanation. The second is easy too.
Just contact any mortgage lender, and a loan officer will look at your credit history, cash available, your income(s) from all sources, and your total monthly obligations (debt).
The ratio of your debt to your income is called your dti. You will hear this term frequently!
Then the lender can determine the maximum loan amount you will qualify for based on current interest rates and loan terms (length of loan) available.
You should also contact several different lenders to compare rates and terms.
Note: “Steps in Building a House – Where to Start” is part of a series of posts. The series will be continued soon.