One-Time-Close Construction Loans
Two-Time-Close Construction Loans
Construction Loan Details
Finding the Right Lender
Getting Pre-Approved
Applying for a Construction Loan
Financing for Owner-Builders        View all FINANCE articles

Unless you are paying cash for your project, you will need a construction loan to pay for the materials and labor, and you can use it to buy the land as well. Construction loans are a bit more complicated than conventional mortgage loans because you are borrowing money for a short term for a building that doesn’t yet exist. They are essentially a line of credit, like a credit card, but with the bank controlling when money is borrowed and released to the contractor.

Both you and your contractor must be approved for the loan. The bank wants to know that you can afford the loan with enough cash left over to complete the house, and that the contractor has the financial strength and skills to get the house built on time and on budget.

If you are converting the construction loan to a mortgage when the building is completed, the bank also wants to know that the finished building plus land will have a high enough appraised value to support the mortgage. Because the lender needs to know the story behind the project, and believe that you can make it happen, construction loans are sometimes referred to as “story loans.” There are many variations on these types of loans from lender to lender, and they change frequently, so you should talk to a few different lenders to see what plan is best for you.

Construction loans are harder to find than conventional mortgages. Start with your local bank where you already have a relationship. Also speak with other local banks including community banks, credit unions, and cooperative banks that are more likely to make these types of loans.

Owner-builders face additional obstacles since you will need to convince the bank that you have the necessary knowledge and skills to get the job done on time and on budget.

Two types of construction loans. The two basic types of construction loans used by homeowners are one-time-close loans, and two-time-close loans. In all construction loans, money is disbursed by the lender based on a pre-established draw schedule, so much money upon completion of the foundation, so much upon completion of the rough frame, and so on. The goal is to only pay for what has been completed, minus retainage, typically 10% of the cost of the project, which is held back until everything is completed properly and the owner is issued a certificate of occupancy (CO).

During the construction phase, payments are interest-only and start out small as you only pay on funds that have been disbursed. When construction is complete, you pay a large balloon payment for the full amount owed. On some loans, no payments are due until the house is completed. Fees on construction loans are typically higher than on mortgages because the risks are greater and banks need to do more work managing the disbursement of funds as work progresses. The faster the work is completed, the less you will pay in interest.

These are the most popular type of construction loan for consumers, but are now difficult to find in some areas. Also called “all-in-one loans” or “construction-to-permanent loans”, these wrap the construction loan and the mortgage on the completed project into a single loan. These loans are best when you have a clear handle on the design, costs, and schedule as the terms are not easy to modify.

The loan has one approval process, and one closing, simplifying the process and reducing the closing costs. Within this basic structure, there are several variations. Many charge a higher rate for the construction loan than the permanent financing. Typically, the borrower can choose from the portfolio of mortgages offered by the lender such as 30-year-fixed, or various ARM’s (adjustable rate mortgages). Some banks will let you lock in a fixed rate with a “float-down” option allowing you to get a lower rate if rates have fallen, for a fee of course. There may be penalties if the construction phase of the loan exceeds 12 months.

Paying a slightly higher rate on the construction phase of the loan is usually not significant, since the loan is short-term. For example, paying a extra 0.5 percent on a $200,000 construction loan over six months, would only add no more than $250 to your borrowing costs.

Construction loans are typically interest-only and you will pay only on the money that has been disbursed. So your loan payments grow as progress is made and more money is released. When the home is completed, the total amount borrowed during the construction loan automatically converts to a permanent mortgage. If you locked in a fixed mortgage rate at closing, but rates have since fallen, you can lower your mortgage rate by paying a fee – if your loan has a float-down option, a feature you will probably want on a fixed rate loan. If you had chosen a variable rate, pegged to the prime or another benchmark, then you will have to pay the current rate at the time the mortgage converts.

If interest rates are stable or rising, locking in the rate at closing makes sense. If rates are falling, a floating rate would be better – at least in the short run. If you have no idea which way rates are headed, a locked rate with a float-down provision may be your best bet.

Pros of one-time-close construction loans:

  • You pay just one set of closing costs.
  • You are approved at the same time for both construction and permanent financing.
  • Multiple options for permanent financing give you flexibility.

Cons of one-time-close construction loans:

  • If you spend more than the construction mortgage, you may need to take out a second loan, and pay additional closing costs.
  • Permanent rates may be a little higher than with a two-time-close loan.

A two-time-close loan is actually two separate loans – a short-term loan for the construction phase, and then a separate permanent mortgage loan on the completed project. Essentially, you are refinancing when the building is complete and need to get approved and pay closing costs all over again. During the construction phase, you will pay only interest on the money that has been paid out, so your payments will be small, but increase as more money is disbursed. There may be a maximum duration for the loan, such as  12-month, after which penalties kick in.

The bank will typically add a 5-10% contingency amount for cost overruns, an all-too-common occurrence on home construction projects. In any event, it’s best to qualify for the highest amount possible. Think of it as a line of credit that is nice to have in place in case you need it.

Because of two loan settlements, closing costs will be greater for this type of loan. However, you may get a better rate on the permanent mortgage as you will be working with mortgage refinance rates, which are typically more competitive than the rates offered in one-time-close loans. While it is easiest to stick with the same lender for the permanent financing, in most cases you will be free to shop around to make sure you are getting the best rate and terms. Also, you will not be locked into a fixed loan amount, and will be able to borrow more if you have added upgrades to the project and increased its value (assuming you qualify for the larger loan).

Pros of a two-time-close loan

  • Greater flexibility to modify the plans and increase loan amount during project.
  • Mortgage rates are often lower than in one-time-close loans.
  • You are usually free to shop around for permanent financing.

Cons of a two-time-close loan

  • You need to be approved twice and pay closing costs twice.
  • You face risks if your circumstances change when you apply for permanent financing.
  • If you don’t get approved for permanent financing, you could face foreclosure.

Construction loans are essentially a short-term line of credit extended to you to get your house built. If you don’t use all the money, you only pay interest for the money borrowed.  If you’ll be taking out a construction loan, your total loan expense needs to cover both hard and soft costs. A typical breakdown is shown below:

Typical Construction Loan Breakdown
Land cost $100,000
Hard Construction Costs $250,000
Soft Costs: Plans, permits, fees $20,000
Closing Costs: Loan fees, title, escrow, inspections, appraisal, etc. $4,500
Contingency Reserve(5% of hard costs) $12,500
Interest Reserve $8,000
Total Project Cost $395,000
Appraised Value(completed project) $475,000
Downpayment $55,000
Loan Amount $340,000


Owner’s equity. With construction loans, banks want the borrower to have some “skin in the game” in the form of owner’s equity. If you are borrowing on the land as well as the construction, you will need to make a substantial down payment of 20% to 25% of the completed value of the land and building.  The land is typically assumed to account for 25% to 33% of the value of the completed project. If you already own the land, then the land will count as equity in the project, and you may be able to borrow up to 100% of the construction cost.

Contingency provision. Since many projects exceed the loan amount, loans often have a built-in contingency of 5% to 10% over the estimated cost. To access this money, you may need documentation in the form of a change order, describing the additional work or more expensive materials chosen and the resulting upcharge. Some banks, however, will not pay for changes with or without a change order.

Interest reserve. Another peculiarity of construction loans is that most people make no payments at all during the construction phase. Assuming that you don’t have extra cash in your pocket during construction, most loans include an “interest reserve,” which is money lent to you to make the interest payments. The money is stored in an escrow account and paid back to the bank as interest. The interest is considered part of the cost of construction by your contractor, or by you as an owner-builder. The benefit is that you don’t have to come up with additional cash during the construction phase. The downside is that you are borrowing additional money.

Draw schedule. In general, the lender does not want to disburse more money than the value of the completed work. Nor do you if you are hiring a general contractor. If the contractor has completed $50,000 worth of work and has been paid $75,000, neither you or the bank are likely to recoup the difference if the builder leaves town, goes bankrupt, or for whatever reason does not complete the job. For that reason, you and the bank will need to establish a draw schedule based on the value of each phase of the work, called a schedule of values.

If you are not borrowing money, you will still need to establish a draw schedule with your contractor so that you don’t get ahead of the work completed. It’s not your job to play banker and provide your contractor with working capital or extra spending money. However, it’s reasonable for the contractor to ask for money to cover the deposit on special-order items. If you are putting up a lot of money, it’s best to put the orders in your name. If anything goes wrong along the way, at least you’ll own the 20 high-end windows you’ve paid for.

Insurance. You construction loan will also require that you or your contractor carry General Liability Insurance, covering any harm to people (non-workers) or property caused during the construction process, and  Builders Risk insurance, which covers damage to the unfinished building. The loan — and the law – will also require that your contractor carry Worker’s Comp Insurance if he has any employees. If the contractor does not carry the proper insurance, then you, the owner, can be sued by an injured employee or neighbor whose child is hurt while playing in the unfinished home. You should also ask the contractor list you and your family as “additional insured” on his liability policy.

Typically, the homeowner buys the Builder’s Risk policy, which may convert to homeowner’s insurance when the building is complete. In a renovation, your homeowner’s policy may already include this coverage, or it can be added as a rider.  If your builder does not carry liability insurance, you will need to purchase this on your own before closing on a loan.  Don’t hesitate to ask the contractor why he does not carry full insurance, and reconsider whether this is the person you want to build or remodel your home. You may find it easier to get a loan (and sleep at night) with a fully insured contractor. Talk to your insurance agent about your potential liability and how to protect yourself before getting too far along.

Most construction loans are issue by banks, not mortgage companies, as the loans are typically held by the bank until the building is complete. Since construction loans are more complicated and variable than mortgages, you will want to work with a lender experienced in these loans. And given that not all banks offer all types of construction loans, you should talk to at least a few different banks to see what is available in your community.

You can learn a lot by listening to the lenders’ policies on draw schedules, inspection and payment procedures, and qualification rules, which will vary from bank to bank. Also banks can be a big help in creating a realistic budget for your project – the biggest challenge for most homeowners (as well as many contractors).  Following the bank’s budgeting format can help you with cost control and can also help you obtain a loan from that bank.

Some banks use loan officers employed by the bank, while others work primarily with independent loan officers. In either case, you want a loan officer experienced in construction loans and one who will walk you through the process and protect your best interests.

In most case the loan officers get paid on commission when they release funds. So there is a potential conflict of interest if the loan officer wants to release funds at the end of project and you want the funds withheld until problems are corrected. Even though payments are generally based on physical inspections of the work done, the inspectors are simply looking to see if the work has been completed, not at its quality.

Also different lenders have different policies around construction loans. For example, if you have a mortgage on your current home that you are selling, some lenders will not count that against your borrowing limits. Otherwise you may need to sell your first house before you can obtain a construction mortgage to build your new home.

Different lenders will also offer different rates. Naturally you will also want the best rates and terms available. If the bank you have dealt with for many years is a little higher than a bank you have less confidence in, tell your local bank you’d like to work with them – but can they do a little better on the rate to match their competitor. Since all banks borrow their money at the same rate, they can all lend at the same rate.

Before getting too far ahead with your plans to buy land and build, or to undertake a major remodeling project, it makes sense to find out how much you can borrow. Conversely, once you know you’re borrowing limits, you can tailor your design to your budget realities. You can meet with a loan officer to just gather information, or to get pre-approved if you plan to start the project soon. Pre-approvals typically last for 30 to 90 days, depending on the lender.

Otherwise, you can waste a lot of time and money designing your dream project, only to find that it is not even in the ball park of what you can afford. And once you are in the ballpark, you will still need to make a number of trade-offs during the design process to keep within the budget (9-ft. ceilings vs. better windows, jetted tub vs. tile floor; etc.). Knowing what you can afford will help you make better decisions. You may decide that you want to add inexpensive unfinished space now, such as attic or basement, that you can finish later when you’re a little more flush.

The specific requirements to obtain a loan change from time to time and vary among lenders. but all lenders look at the same three factors: your credit score (FICO), your income-to-debt ratio, and how much equity you will be putting into the project. The higher your credit score and down payment the better your chances are for approval. If you already own the land, you’re in pretty good shape given the high cost of land these days relative to construction costs.

Income-to-debt ratio. The income-to-debt ratio limits how much of your monthly income you can use to pay off debts. Banks look at two numbers: the “front ratio” is the percentage of your monthly gross income (pre-tax) used to pay your monthly debts. The “back ratio” is the same thing but includes your consumer debt. This is expressed as 33/38, typical bank requirements for the front and back ratios.  FHA accepts up to 29/41 for front and back ratios, while the VA accepts a 41 back ratio, but has no guideline for the front ratio.

Equity. Except in the bad old days of the nothing-down, “no-doc” mortgages that helped spawn the financial collapse of 2008, lenders want the borrower to have some “skin in the game.” The more money you have in a project, the less likely you are to default or not complete the project. On construction loans, most lenders today will only loan you 75% of the appraised value of the home, based on the plans and specs. This is called the “Subject to Completion Appraisal,” done by the bank. If you already own the land, you will probably have no problem with this equity contribution, since land costs have risen much faster than construction costs in most areas and usually account for a large share of the total project cost.

If you’ve been pre-approved, the building appraises within the lending limits, and you show up with full documentation and a reputable contractor, you should no problem obtaining the loan. If you are an owner-builder, you will have the additional task of convincing the lender that you can get the project completed on time and on budget. The more cost documentation you bring the better since cost overruns (or underestimates) are the number-one problem with inexperienced builders. Hiring a construction manager  may help you put together a credible package and secure the loan.

To apply for a loan, you’ll need the following, in addition to the standard financial information required for any bank loan:

  • Building lot details: a deed or offer to purchase,  documentation of protective covenants and other deed restrictions
  • A clear description of responsibilities of the architect (if any), and the general contractor, construction manager, or yourself if you are an owner-builder.
  • The builder’s resume, insurance certificates, and credit and banking references
  • Complete set of blueprints and specifications
  • Material’s list in the bank’s format
  • Line-item budget (schedule of values)  in the bank’s format
  • A draw schedule (payment schedule) consistent with the lender’s disbursement procedures.
  • A signed construction contract, including start and completion dates, and provisions for change orders

It is often difficult for owner builders to get construction loans. Since you are being loaned money for something that does not yet exist, you need to convince the bank that can get the job done on time and on budget. They key to this is approaching the bank the same way a contractor would – with professional plans and specs, a detailed estimate, and a proposed construction schedule. You may consider hiring a construction manager, estimator, or other building consultant to help put your package together.

An accurate estimate is essential, since the bank will assign an appraiser to determine the value of your project. If it looks like your estimate is overly optimistic and the bank does not think you can really get the project built for the loan amount, you will either need to borrow more (if you qualify), add more cash to the deal, or scale back elements of the design.

Many building projects come in over budget, and it’s the rare job that comes in under.  An owner-builder’s (or inexperienced contractor’s)  lack of experience can often lead to important items being overlooked in the estimate. Or the project may incur extra costs through design or construction errors, inefficiency, hidden problems, or changes to the plans or specs during the project. A bank wants protection against these uncertainties, so they may want more of your cash in the project as well as evidence that you are well-organized and have done thorough planning in the plans, specs, and budgets. Of course, you don’t want to be surprised any more than the bank does, so make sure you do your homework. Have the house completely designed, built, and paid for on paper before you start borrowing and digging.

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  1. Need Contractor for Construction Loan?

    Do you have to have a contractor to get a construction loan?

    • buildingadvisor says:

      In general, you can get preapproved for a construction loan up to a certain limit before you find a contractor, but the loan will not actually be issued until the “builder’s package” is completed and approved. This will include the plans, budget, and builder’s resume and financial data.

      The bank will do its own appraisal, based on the plans, to make sure the completed project will be valued high enough to meet the loan-to-value ratio – or you will need to put additional cash into the project.

      Also the bank must have confidence that the contractor can get the project completed on time and on budget. In most cases, any competent builder with similar projects under his belt, and who is not in financial trouble, will be approved. The builder, construction plans, and budget form the story behind loan, which is why these are sometimes called “story loans”.
      Best of luck with your building project

  2. Borrowing to Remodel Before Selling

    What would be the best type of construction loan for an owner looking to upgrade and sell? My parents (both 65) have considerable debt. They have a line of credit and a second mortgage (about $130k together) on the house and about $30k in personal debt totaling in about $160k total debt. Selling the house and moving would be a good option to help themselves. But they live in a small ranch house in north NJ that needs repairs/upgrades. The good thing is, they live in a nice area and with updates the house should be worth up to $300k, maybe more. Is there a way for them to get a construction loan for the purposes of selling immediately after and getting the best value possible for their home? Your help is appreciated. Thank you

    • buildingadvisor says:

      I don’t work in finance, so can’t say anything definitive. However, it doesn’t sound promising for your parents to get a construction loan, which is essentially a line of credit like your parents already have.

      Whether they can get a loan, for how much, and at what interest rate depends on three factors: their credit rating, value of their home (or other assets used as collateral), and their debt-to-income ratio. With their current level of debt, I’m not sure how much more a bank will be willing to lend even if they have a good credit score and adequate collateral. They may be tapped out based on their income.

      To get money for remodeling, people often use a home equity loan (or home equity line of credit) or second mortgage, or sometimes refinance (cash-out refinance) if the home has appreciated a lot and current interest rates are favorable. A loan officer can help you figure out which is the most cost-effective for your situation.

      Since they already have a line of credit, the simplest approach might be to ask the bank to increase the limit on the line of credit. This would have minimal closing costs if they qualify and the bank is willing to work with them.

      You might also look at an FHA 203(k) loan, which is a mortgage loan designed for renovation projects that takes into account the higher value of the improved property as collateral.

      In most cases, it’s best to start with your local bank, who often offer the best deals to existing customers and may be willing to get a little creative. Sit down with a loan officer and ask what the options are. If that doesn’t work out, check out credit unions and private mortgage companies, which may offer more options for marginal borrowers, but at higher rates and higher closing costs. So-called B and C loans may be available, but at a higher cost.

      Other options to consider: Co-signing a loan or using a larger remodeling contractor that offers their own financing.

  3. Leslie A. says:

    Out-Of-State Construction Loans

    I currently live in Nevada and own land in North Caroline where I plan to build a home. Can I get my construction loan in Nevada (or anywhere else for that matter) or do I need to get it in the region of my build site?

    Thanks so much for this comprehensive article!

    • buildingadvisor says:

      You can get the loan from any willing to lend you the money, but most banks are reluctant to make construction loans for out-of-state projects. Construction loans are considered risky to a bank so they want to be familiar with the contractor you will be hiring and the local real estate market.

      If you have a good relationship with a local bank where you live, sit down with a loan officer there and tell him or her what you are planning. They can tell you quickly whether a loan from them is a possibility and offer suggestions for applying for a loan out of state.

  4. Low Appraisal on Construction Loan

    We are just about to begin the application process through a local credit union. We will use a contractor when we build. Our loan officer suggested the contractor’s fee may not be included in the appraisal at completion and therefore would need to come out of pocket because there would be a shortage in the value.
    Is this common? Can you further explain this situation? Thanks!

    • buildingadvisor says:

      Not sure if you are applying for a one-time-close or two-time-close construction loan. With either type of loan, however, there is a chance that the completed house will appraise for less than the construction costs plus the cost of the land. Banks these days are very conservative with construction loans. They do not want to lend more than they can easily recover by selling the house in the event of a foreclosure when the house is completed.

      So a low appraisal is in the bank’s self-interest. It forces the owner to put more cash into the project and reduces the risk to the bank.

      In any case, appraisals on construction loans are difficult as they are based on a set of plans rather than a real house. Sometimes the low appraisal is due, in part, to an inexperienced appraiser or one who is not familiar with the area. Some banks use appraisers selected at random through a service rather than someone they know and trust.

      It helps if you are using a contractor that the bank works with regularly. In some cases, the contractor can recommend a bank that will provide a more generous appraisal. In any case, the appraisal process is part art, part science, and you can get very different numbers from two appraisers.

      On the other hand, you should not ignore an appraisal that is far less than the cost of the project. This may be a signal that you are paying too much for the house and it is not a good investment. The risk is that you will be “underwater” as soon as the house is completed. If you are unable to get permanent financing and are forced to sell, or need to sell within the next few years, you may walk away with a substantial loss.

      I’m not sure about the relevance of the “contractor’s fee,” which is usually built into the cost of construction on a fixed bid. Is this a line item in his bid? Are you considering a cost-plus contract – not a good idea on a new home. In any case, the bank is more interested in the value of home when completed than the cost of construction. Perhaps the loan officer is trying to tell you that you are paying too much for the new home and that the contractor’s fee is excessive.

      Get clarification from your loan officer before proceeding. If necessary, consider working with a different bank. Best of luck with your new home!

  5. Second Appraisal on Two-Time Loan?

    I am in the process of securing my construction 2-step loan. The $500,000 appraisal includes the land. I own the land, with no mortgage (value 35k).The bank has offered a $400,000 construction loan.
    So, if I build the home for $450,000. Would I just need $50,000 in cash, plus closing costs.

    Then for permanent financing: Is another appraisal performed? Will the loan be for $450,000?
    I will need cash for closing costs, and no other cash contributions, correct?

    • buildingadvisor says:

      A construction loan is essentially a line of credit for 6 -12 months, like a big credit card with a very high limit. Since you own the land, that will be considered part of your down payment – typically 20 to 25% of the appraised value of the completed house.

      If you exceed the approved loan limit, you will need to contribute cash, as you suggest. You will also need cash for closing costs, which tend to be high on construction loans, often 3% or more of the principal. Also, if your loan has an “interest reserve” that allows you to avoid interest payments during the term of the loan, some of the $400,000 loan will be used to pay interest rather than construction costs.

      The lender should provide you with a Loan Estimate (formerly called a Good Faith Estimate) that details all of the loan costs. If anything is unclear, sit down with your loan officer and get answers to all your questions. That’s part of what they get paid for.

      You will need another appraisal, and need to qualify again, for permanent financing. The is a completely new traditional mortgage loan which you can get from your current lender or from any other willing lender. The maximum size of the mortgage will depend on your down payment (including the land value), appraised value, your debt-to-income ratio, and credit score as with any other mortgage. If the new home, with land, is appraised at $500,000, it is likely you can likely borrow $450,000 if you qualify for a loan of this size. Your current lender should be able to provide additional details on their lending policies.

      Best of luck with your new home!

  6. Pros and Cons of Construction Loans

    We bought some land and want to build our home on it soon and have two ways we can go about doing this. We can go with a custom builder we like but would need to get a construction loan and, when the home is complete, a VA loan. Or we can go with a reputable realtor/home builder and get a VA loan after the home is completed (no construction loan). If we go with getting a construction loan would we have to pay out interest money each time a draw is made and how much would that be on a $180,000 home. The realtor/builder’s homes are about $15,000 to 20,000 more but wouldn’t include the construction loan. What would you recommend? Thank you!!

    • buildingadvisor says:

      As with much in life, there are pros and cons to each approach.

      A two-time-close construction loan, like you are describing, is like a line of credit with a balloon payment at the end. The full cost of the loan is any closing costs, including “points”, plus the interest payments. Closing costs tend to be high on a construction loan because of the greater risk to the lender and added work of servicing the loan (qualifying the builder and plans, inspecting construction for progress payments, etc.). However, interest payments are only on the amount released, so they start very low and grow over time. The faster the house is built, the less you pay. Also, some banks allow you to delay all payments until the end of the loan, but that raises your loan amount since you are borrowing more to cover the interest payments.

      For example, on a $180,000 loan you are likely to pay a minimum of 3% in closing costs ($5,400) plus interest on the funds disbursed, starting low and increasing. On a $180,000 loan at 4% interest over 6 months, your interest payment would be around $4,000, the exact amount depending on how fast the money is released. Rounding up, your total loan costs may be around $10,000.

      On most types of loans, lenders are required to provide a “Loan Estimate” (former called a “Good Faith Estimate”) showing the actual costs of the loan once you have applied. You should also ask for an estimate before applying, which the bank should provide although not a legal requirement.

      Your risks with this approach are the that the house will take longer to complete or cost significantly more than the estimate, always a risk with custom homes. Read more on Cost Overruns.

      If you buy through the builder/realtor, you should know ahead of time the exact price of the home – once you have made all your selections of finish materials, appliances, etc. You are paying a premium for greater certainty, but the peace of mind may be worth the difference. And some of the savings from the custom approach may vanish as the final bills come in. Construction projects almost always cost more than the original estimate – it’s the nature of the beast.

      In comparing the two homes, make sure you are making an apples-to-apples comparison. For example, what is included in each project: all permits and fees, appliances, landscaping, utility hookups, etc. The builder’s home price may or may not include all these items. The complete house package may include most of these things, but may still omit some big cost items to make the price attractive. Impact fees and fees to the town or to utility companies for utility hook-ups may be excluded.

      Look over the list of Site Development Costs. Don’t be afraid to go over the list with each party. Ask what costs you should anticipate on top of the contract price or house price before you move into the house. Ideally, these costs are shown as “exclusions” in the bid, but often are not. An honest contractor or developer should be upfront about these costs when asked. Read about Budgeting for Site Development.

      Also, compare the specifications for the two houses. Do they have the same quality siding, flooring, roofing, windows, doors, etc.? It takes a little legwork to do this, but otherwise you may be comparing apples to oranges making it hard to make a realistic cost comparison.

      With either option, make sure you are working with a reliable and trustworthy builder – that’s the best guarantee of a successful project and a satisfied customer. Best of luck with your new home!



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