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Meeting with a mortgage loan officer and getting started with a pre-approval is one of the most important first steps you can take. A Johnson Financial Group pre-approval is a fully underwritten loan approval that includes verification of your income, credit and down payment funds. A pre-approval will determine what type of home you can realistically afford based on your current assets and existing debt. A pre-approval also provides the opportunity to ask questions about the construction process: what’s involved, what you are responsible for and what to expect of the builder.

Use the checklist below to gather your documents for the pre-approval. Having this information readily available can make the process quick and easy.

• Your Social Security number to obtain your credit report 
• Pay stubs, W-2s and possibly full tax returns for income documentation 
• Bank and asset statements for verification of liquid and retirement savings 
• Any other necessary information based on your individual situation like business tax returns, current real estate holdings, etc. 
• A lot loan closing statement, if you already own your lot

Learn about the builders and contractors in your area by reviewing local builders associations, attending home builder shows, talking to vendors, reading online reviews and participating in seminars.

• Ask for references from family and friends. 
• Ask for references of sub-contractors or suppliers the contractor works with and review their payment record. Request a copy of the contractor’s insurance policy to understand the unique coverage.
• Review the construction bids, including the scope of the project, references, time frames and price.

Create a detailed budget to ensure you don’t overspend. Leave yourself some “financial breathing room” as new construction projects can often cost more than expected. Savings reserves are helpful should you encounter cost overages during the build process.

Make sure the lot you plan to purchase can accommodate your new home. The dimensions, pitch and location can all factor into the size and type of home you want to build. Regardless of your desired location, you’ll almost always need to choose the land before you begin the design phase. In some cases, the complexity of the building site (steep terrain, remote locations, undeveloped land, etc.) may directly impact the cost of the project.

During construction, you’ll make interest-only payments based on how much of the construction loan funds have been drawn to date.

Have additonal questions? Click here to view the answers to more of our frequently asked questions about building a home.