Searching For Your Builder

When you are ready to begin shopping for a new home, you should shop for a builder as well. Whatever type or price range of home you are buying, the construction quality will be determined by the quality of your builder.

When you look for a builder, you are looking for someone with whom you can communicate and develop a positive working relationship. But the home buying process can be a bit intimidating, especially if you are buying your first home.

Start your builder search process by calling your local Home Builders Association. They can give you the names of reputable builders in this area.

Here are some places to start your search for a builder:

• Other New Home Buyers - serve as excellent references for finding the right builder for your new home. Visit homes built in the style that you plan to buy and find out if the owners are satisfied.

• Realtors-- know the neighborhoods and can direct you to builders who work in the neighborhoods you prefer and build the styles you want.

• Real Estate Section of the Newspaper-- provides information on the builders, the types of homes they build, location and price ranges.

Once you have developed a list of builders research their reputations and the quality of their work. The best way is to visit homes they have built and talk to the owners. Ask the builders on your list for the addresses of their recently completed homes. At the very least, drive by and see if the homes are visually appealing.

When examining a home, look at the quality of the construction, features, the cabinetry, carpeting, trimwork, and paint.

In viewing a home, you must determine whether it lends itself to the type of lifestyle you want to lead. Look at the amount of interior living space and how efficiently the space is used. Find out if the builder is incorporating state of the art energy efficiency features, both in appliances and insulation.

When selecting a builder, be thorough and ask a lot of questions. Get as many specifics as possible. If you receive the answer verbally, take notes. Never hesitate to ask a question because you are afraid of sounding stupid or uninformed. What seems like a stupid question may yield a very important answer. A homeowner should remember to look for certain traits. Following a list of those traits.

1. Location-- Find out and confirm that the contractor has a legitimate business address. 
    
2. Reputation and References-- Ask if the contractor can supply you with any local references. Check out the references; this will give you insight of the contractor?s reputation. Membership in a professional organization shows contractors commitment to bettering themselves through education. Call your local Home Builders Association for a complete list of professionals.
   
3. Reasonable Contract Terms-- The contract should be written and include detailed specifications of work and
   materials to be provided; amount; method and schedule of payments; contractor maintenance of? insurance; cleanup and debris removal responsibilities; and any oral promises or guarantees.
   
4. Warranties-- Determine what is excluded, how long the warranty is valid, and whether it is transferable to a subsequent buyer of your home.
    
5. Bids-- A written bid is important. Take bids from two or more contractors, and make sure all bids include all the work you want and expect to have done.
    
6. Knowledgeable-- Since construction is a specialized field, it is desirable for the contractor to have knowledge in the field through formal education or a reasonable period of time working in the field.
    
7. Deposit-- Put down a deposit of no more than 10 to 20 percent.
   
8. Certificate of Completion-- Never sign a certificate of completion unless all work is performed to your satisfaction and has been inspected and received final approval from the appropriate city inspector. 
    
9. License-- Some cities require builders to be licensed. Ask to see a copy of their license and call the city?s Building Services Department for its validity

Buying a new home is probably the biggest and most important purchase you will make in your lifetime. By doing your new home work to select a builder, you will instill in yourself and your family a sense of confidence and knowledge that you have made the right choice.

Choosing The Right Site

Choosing the right location for your new home is as important as choosing the right builder. Be objective in your evaluation of different neighborhoods-- physical location, character and development regulations. When making your neighborhood selection, make sure you feel comfortable in all areas and decide which location related compromises are necessary in finding the home that meets your needs.

Your new home will provide you with your own personal space and refuge from the outside world. The area in which the house is located will also be an important determinant of how much you enjoy where you live. That is why you should compare locations as carefully as you compare houses.

First, you should weigh the pros and cons of living in larger cities or surrounding towns. Your decision will depend on factors such as your personal tastes, your employment situation, and how you like to spend your spare time. For instance, some people like to be out of town or in the country and don't often use the amenities that cities have to offer. Some people enjoy the amenities of the city and would feel isolated in the country. Many hate to commute long distances and want to live near their work. Others work out of their homes, so they do not have to commute at all.

The current and future structure of your household may also affect your decision, so you should determine if various facilities such as daycare, schools and recreational amenities will meet your needs.

Certain considerations will be important regardless of your household structure. You should be concerned about the quality of the services available in the area. You may want to visit the area before you make your decision and talk to people who live there.

There are countless other features that you would want to consider in finding a location that best suits the needs of your household. You are not likely to find a place that is perfect, but you will want to come as close as possible. A good way to organize your thoughts and prioritize your options is to write each feature on a 3x5 card. After you have a stack of features, arrange them in their order of importance to you.

Many real estate professionals believe that location is the most important factor affecting the value of a home. That's why it should play an important role in your home buying process. By doing your homework and finding the location that best suits your needs, you can settle comfortably into your new neighborhood and get the maximum enjoyment from your new home.

Credit Check Part of Home Buying Experience

Among the many documents you will sign when you apply for a mortgage will be one that gives the lender permission to check your credit history.

The lender checks your credit to determine whether or not you consistently meet your financial obligations. It is one of the tools they use in deciding whether to approve your mortgage request.

A credit check will reveal if you have paid your bills on time and, if not, how late they were paid; if you have outstanding debt that was never repaid; if you have declared bankruptcy; how many credit cards and other credit lines you have open, the balances and limits, and more.

It will tell the bank whether you have established a record of paying bills and repaying debt in a timely manner, or if you have a history of late payments and taking on more debt than you can repay. This information will be valuable as the lender determines whether or not it can trust you to make your monthly mortgage payments on time for a long period of time.

The credit check may reveal that you have perfect credit-- something that happens only about 20 percent of the time-- or that you have some explaining to do.

For example, if the only blemish on your credit card, you may be asked to write a letter explaining why the payment was late. If the offense is more serious-- unpaid debt, several late payments, a missed car payment, etc.-- it will be harder to explain. The lender may be willing to work with you to repair your credit or you may be deemed not credit-worthy and turned down.

Serious problems may be revealed during a credit check. Your name may get mixed up with someone else's, and the lender may get a completely wrong picture of your finances. Or an unpaid debt that you later paid could show up on the reports being outstanding.

An important tip to remember is that the lender will check your credit twice-- once shortly after you apply for the mortgage, and once again just days before your loan approval. The lender does this to make sure that you haven't substantially increased your debt burden by buying a new car, for example.

Planning to Remodel?

As with any important purchase, planning is important. Although it may take some time to find a remodeler with whom you feel comfortable and can communicate, it is worth the effort

One of the most important things that can be done to check up on a remodeler is to ask for a list of recent jobs that they have done which are similar to yours. They may have done some super kitchen remodels, but that won't be much of an indication of how well they can add an additional level to your home.

Then, check up on the references and if possible, visit the projects. A remodeler who cannot give a fairly extensive list of satisfied customers is either inexperienced or unreliable.

While it may be tempting to go with the lowest bid, be careful. No two remodelers will do a job exactly the same way. When soliciting bids, be as specific as possible and ask the bidder to specify the materials and brand names on which they are basing the bid. Be especially wary of bids significantly lower than the range indicated by the others. Generally, remodelers suggest seeking bids from three or four remodelers.

Some restraint should be exercised with regard to seeking multiple bids. No two remodeling contractors will recommend or specify the exact same approach to a project. Too many different opinions on the specifics may confuse a homeowner more than help them. You should choose two or three contractors by reputation, or based upon a preliminary conversation with them and solicit bids and design ideas only from those two or three contractors you chose. If you are comfortable with a contractor and the projected cost (even if you have only gotten one or two bids) you should not be afraid to go ahead and sign a contract.

Most importantly, make sure the contractor you choose is licensed. Many cities do not require the contractor to be licensed; however, it is good practice to check with your city building official to see what requirements builders may have. If your city requires the contractor to be licensed and they are not, there is also a chance that they are not insured. This means you may be held responsible for any damage done to your property. You may also be held responsible for any injury to any individuals, including the contractor and their employees while they are working on your property. You will also be held responsible for seeing that the work complies with any local building codes.

By the time you decide to hire a remodeler, you probably already have a fairly good idea of what you want the finished job to look like. A professional remodeler can take your ideas and recommend the most effective ways to achieve the results you are seeking, while staying within your budget.

The contract documents should include ample specifications and drawings to spell out what the finished project will include. It should also be specific about any items or portions of the project that are not the contractors' responsibility. In general, the more specific the contract, the less chance there will be for misunderstandings in the future.

For more information about remodeling and choosing a professional remodeler, e-mail the South Dakota Home Builders Association at sdhbvp@sdhomebuilders.com or call 605-224-2761.

Closing the Deal

Getting prepared for the purchase of your new home can be very stressful. It is important to learn as much as possible about the process and eliminate possible surprises. Once you find the home you want, make the decision to purchase, and are approved for a mortgage loan, it is time to go to settlement, or closing.

There are many costs connected with closing, and one of the most important is the points. Points, also known as a loan discount, are often the largest of your settlement costs. A point, usually one percent of the loan amount, is the interest you pay on the loan up front to make the yield on your loan more profitable to the lender. The number of points you pay varies depending on the type of loan you have and the total amount of mortgage interest you will pay over the life of the loan. If you have a Veterans Administration (VA) loan, the maximum you can be charged is one point. So if you are borrowing $90,000, the most you would have to pay is one percent, which equals $900. For Federal Housing Administration (FHA) and conventional loans, the number of points you pay can be much higher.

The more points you pay up front, the less interest you will have to pay over the life of the loan. Over the course of a 30-year loan, each point you pay at closing reduces your interest rate by roughly 1/8 of a percent. Initially, this may not seem like much, but over the life of a loan, it can result in big interest savings.

With all the costs incurred during settlement, you will have to decide if you want to pay more or fewer points during closing. If you do not have a lot of cash for settlement, you'd probably be better off getting a loan with fewer points and higher monthly payments. If points are paid separately and not subtracted from the loan amount, they are tax deductible. Be sure to consult you tax advisor for more information.

Sometime during the application and settlement process, the points and mortgage interest rates are locked in. Some lenders will lock in the interest rate and points either at the time you apply or when your loan is approved. Be aware that some lenders charge a non-refundable fee for locking in points and interest rates. Some lenders will lock in the interest rate on the loan and let the points float. Other lenders will allow points and interest to rise and fall with the market until the time of closing. In this instance, the buyer could pay more or fewer points, depending on what the interest rate is when you go to closing.

Your real estate agent or loan officer is required to give you a good faith estimate of all the closing costs you will incur in making your new home purchase. Find out as much as possible. Shop around with different financial institutions to find out what options are available and choose the one that best fits your spending plan so you can take advantage of today's low interest rates.