What Are the Out-of-Pocket Costs Associated With Building a Custom Home?
Building a custom home is a dream for many, but the costs can be more complex than buying an existing home. It’s a potential challenge you need to consider to mitigate surprise costs and unnecessary spending.
That’s where an experienced design-build firm like Falcon Alaska comes in. We take a proactive approach to helping our clients understand what goes into custom homes, including upfront payments, so you can enjoy the process and final result.
You can expect the following out-of-pocket expenses:
Down Payments for Construction Financing
Falcon Alaska doesn’t offer in-house financing, so you’ll need to work with a bank or mortgage company to determine how much you’d be pre-approved for before starting the construction loan process.
Construction financing generally requires at least a 20% down payment for both your land and construction costs. However, if you already own the land you want to build on, you’ll just need a down payment for construction costs.
Any costs above your loan amount will come out of your pocket, so plan ahead to ensure your goals for your custom build are within the scope of what you can afford.
Property Taxes & Insurance Costs
Property taxes and insurance still need to be paid for the land you’re building on, even while your home is under construction.
Your lender can hold an escrow account for taxes during construction, or you can set aside money for this on your own.
Land Purchase, Closing & Preparation Costs
Selecting the perfect location for your custom home is one of the most exciting parts of the process. While Falcon Alaska doesn’t offer land purchasing, we can help you select the lot for your needs.
Once you choose the land you wish to buy, you’ll need to cover closing costs with your lender if you’re financing. This includes appraisal, inspection fees, and construction escrow fees. You’ll also need to consider title fees, transfer taxes, and attorney fees.
Another important aspect to consider when purchasing land is if it’s ready for development or if you’ll need utility connections or land excavation and leveling before construction can begin. Any land preparation will generate additional costs.
Design Fees
Falcon has a comprehensive design-build process that outlines what you can expect. After an initial meet and greet, we’ll collect a fee to draft a design concept and bring your vision to life with 3D renderings.
Once you approve the preliminary design and budget, we’ll collect a project examination fee and sign an agreement. The customization of your custom home lies in the details, so we’ll work together to select interior and exterior finishes.
This is a critical step because it determines how feasible your design is for your budget. Working with our in-house design team makes this easier, so you don’t need to figure it out alone.
With all your selections and construction documents complete, Falcon Alaska will send the plan for bid and provide a final budget proposal.
We’ll carefully review any upgrades or downgrades before signing the contract packet. This guarantees an accurate budget so you don’t have to worry about added costs during construction.
Construction Loan Payments
Your lender will incrementally disperse funds to your builder, aligning with different phases of construction, but you’ll only need to pay interest to your lender.
Construction loans typically have four to six draws during a 12-month build, so the number of draws may vary based on your project timeline.
These interest payments are based on the amount disbursed after each draw rather than the total of the end loan, meaning your payments will be higher as the project progresses.
Falcon makes it easy to stay updated with the building process with online project management software that gives you direct access to your team, schedule, budget, and progress photos.
If you choose a stand-alone construction loan, you’ll need to secure a separate loan when construction and the final inspection are complete.
If you choose a construction-to-permanent loan, your loan will convert to a mortgage, and you’ll start paying your monthly principal and interest payments.
Landscaping Costs
Like most builders, landscaping isn’t included in Falcon’s service offerings. You’ll need to work with a separate landscaping company to plant flowers, shrubs, and/or trees that suit your home and lot.
Landscaping costs can add up quickly, so you need to remember this critical step to allocate space in your budget.
Build Your Dream Home With Falcon Alaska
Building a custom home can seem overwhelming, but Falcon Alaska provides architecturally inspired designs and efficient, well-managed construction for a seamless process.
Our courteous team will ensure the project is completed on time so you won’t incur unforeseen costs. With all your needs met under one roof, Falcon ensures your custom home will exceed your expectations without exceeding your budget.
Are you ready to start your custom build in the Mat-Su Valley? Call 907-745-3865 to schedule a consultation.
