Guide to Planning, Financing and Building Your Home

Guide To Planning, Financing And Building Your Home

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    Self-constructing a new house allows you to save money while still getting the house of your dreams. To learn more about self-building, check out this comprehensive tutorial. If you think self-construction is out of your price range, reevaluate. Self-build homes come in all shapes and sizes, so you may choose one that works within your budget and interests, even if you're not interested in getting your hands dirty.

    Even though do-it-yourself construction is not as common as it is in places like continental Europe at the moment, that could soon change. Help to Build, Self Build Wales, and custom build schemes like Graven Hill are just a few of the expanding new schemes that aim to simplify the process of constructing one's own home. A recent assessment informed the government of methods to expand the number of self-built homes, and there are now many more lenders offering self-build mortgages than in the past.

    The advantages of building your own home are manifold, ranging from the satisfaction of having a living space designed specifically for your requirements to the potential for financial gain upon selling. If you're looking for the perfect house, building it yourself is an option to consider. 

    Of course, self-build is going to be significantly more complex than simply buying a new home. However, if you get a handle on the process with this helpful, thorough guide, you'll be armed with all the knowledge you need to both foresee these problems and succeed with your project.

    10 Must Know Planning Considerations

    home design

    A home or building plan is the designer's prescription for the project, tailored to the specific needs of the client. For the benefit of the users or tenants, a conceptual plan is a visual depiction of intellectual ideas backed by mathematical calculations. The efficiency and effectiveness of a plan are how it is evaluated in accordance with the "Form Follows Functions" philosophy.


    The term "flow" is used to describe the relationship between different spaces, such as the kitchen and the dining room, which need to be close together because food service is a top priority. These locations are important to each other and should not be separated.


    There is just as much traffic inside a building as there is outside on the streets and highways. Nonetheless, no obstructions or unnecessary detours should impede the free flow of people inside the facility.

    Light And Ventilation

    Natural light and ventilation from outside are incomparable to artificial lighting and air conditioning. Lighting and air conditioning are two artificial conveniences that come at a high price.

    Areas, Sizes, And Shapes

    As a result, it is imperative that all designs be developed at a human scale, as they are meant for human consumption. Furniture, appliances, and other facilities, as well as the most important lanes or pathways for routinary motions inside the house, should all have adequate space in any well-designed home. Plan and elevation shapes should be purely practical and devoid of ornamentation.


    Describes the location and orientation of the sun and moon, as well as the typical direction of the wind. The bedroom is the typical location for lunchtime and afternoon naps. It follows that a bedroom should not be situated so that it receives direct afternoon sunlight. Due to the fact that many bacteria are killed by direct sunshine, the kitchen, laundry room, and bathroom are all better off facing west.

    Zoning Laws

    Before settling on a permanent location for a home or other structure, it's important to check the zoning ordinance. It's possible, for instance, that you'll end up developing your home in a business district.


    Having a ceiling that isn't too low or too high is important for a number of reasons, including fresh air circulation, a pleasant ambience, and the room's aesthetic value. The heated air in the low-ceilinged space necessitates the use of a fan.

    Electrical Layout

    It's important to think about where to plug in your appliances at the same time you're deciding where to put them. Because of where the outlet is placed, the appliance's extension cord is the most distracting thing in the room. You know you have a well-designed electrical system when you can use it without resorting to a makeshift extension cord. Consideration should also be given to the placement and convenience of light switches. It should be placed close to the door of each room so that turning it on or off is a breeze whenever you enter or leave.

    The Location Of The Doors

    The failure to consider a door's optimal placement in the planning stages is only fully appreciated once it has become a frustrating hindrance to the occupant.


    Despite the fact that superstition has no place in modern architecture, a planner is obligated to comply with a client's wishes if the latter believes and insists that his success in life hinges on the good fortune afforded by the planner's adherence to the client's superstitious beliefs.

    Getting A Mortgage When Building Your Own Home

    Whether you're a risk-taker, a do-it-yourself pro, or just picky about where you put down roots, the idea of constructing your own house may excite you. After all, when you design and construct your own home, you get final say over every aspect of its appearance and function. That means you get to pick every last detail, from the floor plan to the amount of rooms to the style of rooms to the fixtures to the pool to the aquarium to the stair slide.

    While the thought of constructing a one-of-a-kind house from scratch is appealing, the reality of securing funding for such an enormous project is another matter entirely. In order to finance the building of a custom house, the vast majority of buyers will require some sort of financing. Obtaining a loan for a do-it-yourself construction project is a lot more challenging than it sounds.

    A Standard Mortgage Loan Won’t Do the Trick.

    If you have decent credit and a steady salary, getting a conventional mortgage to buy an existing property shouldn't be too difficult. However, getting conventional financing to construct your own home is next to impossible. Why? Consider that you are essentially asking a financial institution to invest in something that does not yet exist. The situation is exacerbated by the fact that building is inherently risky and financiers hate taking chances.

    Find A Construction Loan

    You will need to look into more specialist financing options if you intend to self-build. the construction loan comes in. A construction loan is often a short-term loan (generally the maximum of one year) intended to finance the expense of building your home. It is also known as a self-build loan or construction mortgage.

    The interest rates on these loans are typically much higher than those on fixed-rate mortgages. Construction loans are often short-term loans used during the building process of a home. Once construction is complete, the borrower has the option of refinancing the loan into a permanent mortgage or getting a new loan to pay off the construction loan.

    Get Ready To Lay Lots Of Groundwork 

    You should perform some major stretching as you get prepared to apply for a building loan. Borrowers must put in a lot of time and effort to secure one of these loans. There are a lot of hoops you'll have to jump through to convince the lender that your house construction project is real, viable, and low risk.

    If you're applying for a construction loan, the lender will want to see a detailed plan for the project and a realistic budget. Floor plans, building materials, insulation, and height of walls and ceilings should all be included in the detailed list of construction information you provide. (Experienced builders generally compile this information into a "blue book" for a house construction project.)

    Make A Sizable Down Payment.

    Construction loans typically have a minimum down payment requirement of 20% and a maximum down payment requirement of 25% from most lenders. The minimum down payment is excessively expensive. Why? Because the lender considers construction loans to be "greater risk" than standard mortgage loans and wants to make sure you stick around to finish the job.

    Know Where You Land

    The price of the land itself must be factored into the construction loan's total amount if you do not already own it. Paying cash for the land is preferable if at all possible. A greater down payment will be required to get the construction financing otherwise.

    Work With A Qualified Builder

    Construction loan approval typically requires evidence of a professional builder's involvement. Most people agree that a certified general contractor with a proven track record in the industry constitutes a competent builder.

    A normal construction loan is not something you can count on getting approved for if you plan on acting as your general contractor or building the home yourself. Considering owner-builder construction loans could be a good option here. Unfortunately, in today's housing market, it might be difficult to qualify for these loans. You can still show your competence as a builder by submitting a well-researched construction plan. Have a backup plan in case something unexpected comes up.

    It's not easy to get approved for a construction loan, but the experience of constructing your own home from the ground up is well worth the effort. A well-thought-out proposal, the participation of a licensed home builder, and a sizable down payment will improve your application's likelihood of being approved.

    Frequently Asked Questions

    Financing for a new construction home may be similar to financing for an existing home if you purchase from a local builder who has already purchased the property and is building many homes within a community. But if you want to build your own house from the ground up, you'll probably need a construction loan.

    If you choose a one-step construction loan, you'll be working with the same lender for both the building and the mortgage phases, and you'll fill out all the necessary paperwork for both loans simultaneously.

    When constructing a house, some buyers take out not one, not two, but three loans: one for purchasing the land, one for construction, and one to refinance the construction loan into a permanent mortgage (which works like a typical home loan).

    The room plan of your house is the starting point for many of the building specifics. For example, an oversimplified floor plan shows only walls; this is the framing plan. In addition, the joists, trusses, and beams are typically shown to show how the building is put together.

    Home equity loans are not as common as conventional mortgages, so you may need to look for one. Some financial institutions offer a single-transaction loan that begins as an interest-only line of credit during construction and is then transformed into a mortgage once the house is finished being built. It's beneficial because you'll have to pay closing charges once.

    Types Of Loans

    building permit

    Lot Loans

    If you don't already have a plot of land or are planning to pay cash for the land, a lot loan will be the first form of loan you'll require.

    • Many banks offer loans specifically for the purchase of lots.
    • Interest rates and purchase costs for land change based on a number of factors, including the worth and location of the property, and the size of your down payment.
    • Land in a city centre is more likely to be pricey than land farther away.
    • You can get a loan on a lot for anywhere from two years to twenty years, and the interest rate can be variable or fixed.
    • When choosing a location to build a home, it's important to think about a number of aspects, such as accessibility to a city or town centre, future value, quality of local schools, and zoning and land use regulations. Before you can gain authorization to start construction, you must close on the lot.

    The down payment amount, your annual income, the overall cost of the loan (principal and interest), the loan's tenure, and your credit history are all factors that a bank or lender will consider when deciding whether or not to grant you a loan to purchase a lot. Past occurrences that have had an impact on your financial situation may also need to be disclosed.

    The down payment will likely be larger than it would be for a conventional mortgage.

    Construction Loans

    A construction loan is what you'll need to fund your new custom home. As a specialist form of financing, construction loans are not offered by all financial institutions. A reliable custom builder, however, will be aware of which financial institutions provide construction loans and will assist you in applying for one.

    Construction loans typically have a shorter term (12-18 months depending on the size of the project) and need a larger down payment (20-30% of the total loan cost is normal). Depending on your creditworthiness, the interest rate on a construction loan with a term of twelve months will be greater than the rate on your mortgage for the rest of the loan's life.

    • One step or single closing loans are other names for a construction-to-permanent loan (C2P). After the construction is complete, this loan will immediately become a mortgage. You won't have to reapply for a loan, regardless of whether the lender refers to the conversion as a modification or a refinance. Higher monthly payments compared to a conventional mortgage are possible, but could be adjusted in the event of a refinance.
    • Independent construction loans are often short-term and used solely to finance the development of a building. The loan must be repaid once construction is finished. Failing that, you'll have to start the mortgage application process. When considering authorising a construction loan, a lender who is only providing the financing (and not the mortgage) may want to see proof of pre-approval for the permanent mortgage.
    • The focus of this article is on brand-new buildings, however existing buildings can also benefit from construction financing. There are government programmes available for certain improvements, and you may be allowed to bundle this with a conventional mortgage.

    Mortgage-Based Loans

    Once construction is complete, a mortgage (or "permanent" loan) is required to pay for the house. No new closing expenses would be required for a construction-to-permanent loan. To finance the purchase of a home, the vast majority of borrowers turn to mortgage-backed, long-term loans. Interest rates are based on a number of factors, including the completed home's value, your credit score, and your ability to repay the loan.

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