Process for Building a New Home

Mumm’s have been building homes since the late 50’s. We are now in our third generation of builders. We have evolved over the years and have kept up with the current trends and technology. Brad is the third generation and we keep up with the new building products, information, trends, and energy savings ideas by going to the International Builders Show each year.

We can build from your plans, our plans, or take your ideas and thoughts to put the ideal home plan together for you. We build everything from starter homes to custom homes. No matter what you are going to have built we will spend as much time as it takes to make you the homeowner happy with the decision to use us to build your home.

It is a big decision to build a home. It is a decision that should bring your entire family closer together and an experience that you will cherish forever.

The first consideration is how much do you want to spend on a new home. Quality of life is very important and a new home can be a major part of it. You just don’t want to over extend yourself. Keep in mind you will probably have a mortgage, taxes, and power bills as well as all of the day-to-day expenses.

A mortgage company or a bank can tell you what you can afford by evaluating your financial position. This is called being prequalified for a loan. Knowing how much you have to put down on a house plus what the lending institution will loan you, you now have a place to start. Whether you have $100,000.00 or $700,000.00 we can find a plan that works for you and within your budget.

Now the decisions come into play. Where will you want to live? Maybe you have already made that decision and have a lot or a piece of ground. If you don’t, then a parcel will need to be selected based on your prequalification letter. The biggest decision will be to build in a small town, a city, or on a piece of ground out in the country. All three have their pros and con’s. Generally a lot in a small town will cost less than a lot in a city, and a lot in the city will cost less than a parcel in the country. A parcel in the country will probably have the added expense of a well and some sort of septic system. We will build wherever you would like to build. We are even licensed to do septic work, which is one less thing for you to think about.

 No matter where you build you will want to be in an area where the houses around you will be in a comparable price range. It is better to be a little under the average house price in the subdivision because of resale value. It will pull your value up a little. Conversely you don’t want to build a home worth way more than the average house in the subdivision because it will pull your value down. Things like noise, parks, traffic patterns, crime rates, good schools, walking paths, availability of shopping, theaters, sports activities, and local churches are just a few of the considerations of locating your new home. These may be important if you plan to live there very long. Your children will grow up in this environment and you want to make it the correct one. We will be happy to help you locate a lot in any subdivision in the area or even a piece of ground. My wife Cheryl is a realtor and knows what is available and the entire price ranges.

At this stage you are prequalified and found someplace to build on. Now comes the fun part. If you have been thinking about this for a while then you probably have been to open houses, home shows, cut pictures out of magazines looked on the internet for house plans and driven around to look at other homes. That is great. Now is the time to put what you want down on paper. There are a number of questions that you should first consider before you decide on the perfect plan.

1. What style of house do I want? Ranch, two story, story and a half, colonial or something else

 2. Do you want a basement? Finished or unfinished, will it serve as a bedroom area for kids, game area, hobby area, theatre room

3. What will be the most important rooms in the house? How open will it be? Will the size and location of the kitchen be the focal area? Is a living room necessary? How many bedrooms and bathrooms? How much storage space do I need in the house? How big of garage do I actually need for all of the stuff or will I build an out building at some point? Do I want walk in closets?

4, These are just a few of the things that will need to be discussed over the kitchen table with family and friends.

My job is to bring all of your ideas and wishes together to develop the perfect plan for you, You may already have a plan or a plan that you like that needs a little tweaking. We can do that for you. Drawing up a floor plan is generally not a onetime deal. I will rough out what I think will work with your ideas, Sometimes it will take three or four attempts but keep in mind this is your house and you want to get it right. I will make recommendations based on my forty years of drawing plans but I will never tell you something won’t work unless it violates a safety code.

Once the drawings and specifications are complete we will put it out for bids to see what the final cost will be.

When all of the bids come back we will put a contract together explaining what we as builders are going to do and provide and what we are not going to do. We will outline the things that are required of you and that is mainly making decisions in a timely fashion with deadlines so we can keep the building process on schedule. Some builders don’t take the time to explain what is going into your new home ~ and that can lead to big problems, I will take the time to spell out exactly what we are providing and who is going to do the work. As much as we try to agree on paper before the job starts there are always little changes and sometimes big changes. These are handled with what is called a change order. You as the homeowner and we as the builders will come to an agreement on the change cost and both parties must sign the change order before work can continue. That solves a lot of potential problems at closing for both sides.

Once all of the decisions are made the contracts must be signed but there is still one contingent. The bank or mortgage company will want to do an appraisal on the drawings and contract so they know if you default on your loan that they can get their money out of it if they have to sell it. At that point the bank will issue what is called a commitment letter stating that they will guarantee they will provide a mortgage for the property unless the owner’s financial situation changes drastically during the construction phase.

Construction Loans

A construction loan is a loan from the mortgage institution that you are dealing with or another bank, which is a loan to cover the money needed to build the home. The lending institution for the construction loan will usually set up an account with a local title company to disperse the money needed to build the home as needed. The title company will disperse the money in the form of draws. There are usually four draws:

  • The first is taken before the builder starts in the form of a down payment. The down payment can be for 5 to 10 percent of the job or more depending on who is buying the lot if it hasn’t already been purchased. I prefer to buy the lot if it isn’t one of ours for lien purposes.
  • The second draw is usually when the foundation is in.
  • The third is when the house is framed and roofed.
  • We normally take the final draw at or right before closing.

A draw is done by using what is called a sworn statement. The sworn statement lists all of the suppliers, all of the subcontractors, and the builder’s name. It is a record of who is getting money on each draw, how much they are receiving, and how much there is left on the project left for them. The title company will provide lien waivers for every person receiving money on a draw. Some of them will be partial lien waivers and others will be final lien waivers. For example: If a company is paid to waterproof the basement they will only be paid one time and therefore they will get a final lien waiver. The builder will typically get a partial lien waiver to sign each draw until the final check and then it will be a final lien waiver. Lien waivers are actually called mechanic’s lien waivers in court. A lien waiver is used to protect to the homeowner and the mortgage company from lawsuits resulting from people who didn’t get paid for working on the job. For example: Let say the foundation company didn’t pay for the concrete that they used for the foundation. The foundation company says to the builder that you owe me $30,000.00 for the foundation. The builder should check and make sure that all of the items the foundation company used to build the foundation were paid for and the items should be listed on the lien waiver form to make sure everyone gets paid. If I the builder pay the foundation company or the title company pays them and we haven’t checked on whether he has paid for his materials or labor we can be held liable for that amount. That really messes the process up. The days of a handshake and a little agreement are long gone. The whole idea of lien waivers is to protect you the homeowner. It is a good system but gets a little frustrating sometimes from a builders point of view. There are many contractors that took the money and forgot to pay all of the suppliers. A lot of them are now working in Florida, Texas, Arizona, or residing in prison somewhere. I have been in business for 34 years this year and have never had a lien filed against me.

There are two other options with reference to construction loans. 1. We can do the loan in house with the bank we use all of the time. The fees are generally less than other banks and the interest rate is usually less. I will only take money as needed from the account. You will still owe the fees and interest at the closing but the total will be less than what you can usually get .The lien waivers and sworn statement will still have to be used. The bank would be paid at closing along with the fees.2. The other option is that we pay the fees and an estimated amount of interest and just roll it into the price of the contract so there won’t be any extra fees at closing. With any of the options a loan commitment letter will be required.

 

Codes

Codes vary depending on where you are going to build. Some cities are on the 2003 code book, some are on the 2006 code book and some have moved up to the 2009 code book. They all are different especially when it comes to insulation values. The codes state what the minimum standards are for lighting, insulation levels, windows, doors and much more.

 One of my jobs is to make you aware of the options on all of the materials and processes in the building system. There are a lot of things that have changed in the construction business in 34 years and the two biggest is how we heat and cool our homes and how we insulate them.

 The power bill will be an important part of the monthly expense of your new home. I feel it is very important to use the most insulation you can afford as well as the most economical heating and cooling system available. The decisions will last the lifetime of the home. I would rather pay the insulator a little more up front than pay the power company more and more for the lifetime of the house. Have you ever seen the power company ask for a rate reduction?

 

Allowances

 In the contract we will have what is called allowances. In the design phase we don’t have time to go through and pick out every color of every room, every piece of flooring, every light fixture or appliance. What we will do is include an amount for certain items that should cover that item’s expense when it is installed in the house. I am usually close on these from experience but if you feel you might spend more than what I have set aside for the allowance then say so and we will increase it so that there are no big surprises at closing. Example: The typical allowance for light fixtures in a 2000 sq ft home would be $1500.00. You may want to spend much more than that. Please let me know what your tastes are so we can adjust accordingly. Some builders will give you really low allowances for the different items to make their bid look better. They make look better but at the end of the job you may actually have to come up with more money than your mortgage because you have run over on the allowances.

Decisions on interior items

There will be many decisions to make on the interior as well as the exterior of the home, but keep in mind this is your home and your style will be on display and it is something to really get excited about. We use suppliers that are interested in working to make sure you are satisfied with their work. The cabinets will come from an Amish cabinet maker. We can get custom cabinets made to order at a better price than out of a box elsewhere. You will be able to pick the wood, the color, the style and all of the amenities. We will work with you on trim, fireplaces, windows, doors, finishes, roofing, siding, paint colors and everything that goes into the house. We don’t limit the number of carpet samples you can pick from, cabinet styles or anything else. You are paying for it so you should have all of the options available. If you have a certain company that you would rather use for certain items that is fine with us. I normally use the people that I do because I trust them to do the best job possible and if there is a problem I can get them to come back and fix things.

Your job is to make decisions in a reasonable amount of time. If you don’t make the decisions in a timely fashion it will hold up completion of the job.

It seems like a lot to comprehend and accomplish but we will be here to help you along the way. That is our job. We recently finished a home and the homeowner came by every day to see the progress. The day she came in to see the staircase and kitchen she was near tears. She was so pleased with how it all looked when it all came together. She and her husband had been saving a long time for this home and it was very gratifying to see someone so excited about what we and she had done to put this house together. That is what makes my life fun.

Whether it is your starter home or the home to retire in we can meet all of your needs. I hope we get the opportunity to build your dream someday. We will look forward to it.

Share