Building Your Home

Step 1 of 8 – What is my Price Range

Before you start looking at house plans or developing your own, you'll need to understand what price range you can afford. A commonly used guideline is 2.5 times your yearly gross income (income before taxes) plus the amount of your down payment.

Step 2 of 8 – How much can I afford to borrow?

Your monthly gross income (income before taxes) and your debt load are used to determine how much you can borrow. Your loan payment plus your monthly debt (not including your household expenses such as heat and electric) should not exceed 30% of your monthly gross income. Use our handy calculator to help you determine your maximum monthly loan payment.

Click here to view our Mortgage Qualifier calculator

Step 3 of 8- Finding the Right Mortgage Product

A Construction Mortgage is used for the building stage and will be for 80% of the perceived value of your home at the time of completion. The perceived value is calculated by an Appraiser who uses estimates provided by your builder along with an evaluation of recent selling prices of similar homes in the area (often referred to as "comparables"). The homebuyer must provide 20% of the perceived value to obtain a construction mortgage.

The contract you sign with your builder will include an "advance schedule" which will outline each phase of the building process at which a payment will be made to the builder. This schedule is typically from 3 to 12 months. At each "advance" point, the bank will verify that the appropriate work has been completed and issue a check to the builder and homeowner. Until construction is complete, the customer only pays interest on the amount of money being advanced to the builder.

Once the construction is completed in accordance with the contract, the Construction Mortgage is converted to a permanent mortgage.

A wide variety of home loans and financing options are available for the permanent mortgage. Some choices are yours to make; others are based on specific circumstances such as:

First Citizens Community Bank Loan Products

Step 4 of 8 – Obtain A Pre-Approval

The Pre-Approval step allows you to validate your ability to borrow and provides an estimate of your maximum loan amount. During the pre-approval process, a credit check will be performed. A letter can be printed by you and provided to your contractor to assure them that your bank has tentatively approved you for this loan amount.

Obtain Pre-Approval Now

Step 5 of 8 – Finding the Right Home Design and Contractor

Building your first home is an exciting time. There are multiple ways to go about finding the design that's right for you. You can purchase a pre-designed floor plan or design one yourself. But before you begin your search, think about what's important to you in a home so you can narrow down your search.

  • Do you have a preference on the style of your home ― log home, ranch, cape cod, two-story, etc.
  • What are your must haves ― number of bedrooms, number of bathrooms, open floor plan, 2-car attached garage, and so on.
  • What are some features that would be nice to have but may not be mandatory based on the price ― hardwood floors, fire place, Jacuzzi tub, etc.

Finding a Local Contractor

Step 6 of 8 – Applying for your Mortgage Loan

So, you've found your home design, got pre-approved and signed the contract with your builder. Now you're ready for the next step – getting your Mortgage. You can apply for your mortgage loan by contacting a lender or you can apply on-line. A lender will contact you if you apply on-line. You will be asked to provide a list of information to your lender so they can proceed with your loan review and approval:

Check List

  • Paystubs for all applicants for the prior month
  • W-2's for all applicants for the most recent tax year
  • Tax Returns for all applicants for the prior two years
  • Bank statements for prior two months for all deposit accounts and the last quarterly statement covering any investments listed on the application including retirement accounts
  • Copy of signed purchase agreement
  • Copy of driver's license for all applicants
  • Copy of social security card for all applicants
  • Divorce Decree (if applicable)
  • Alimony / child support documentation (if applicable)
  • Death Certificate (if applicable)
  • If a refinance, a copy of the most recent year's tax bills (spring and fall)
  • A copy of the homeowner's insurance policy if refinancing or prior to the closing if purchasing a new home

Disclosures: Within 3 days of application, you will be provided with several documents:

  • Truth In Lending Disclosure – provides information about the proposed loan such as the annual percentage rate, total finance charges and total payments.
  • Good Faith Estimate – Lists your closing cost. This is provided to give you some idea of the approximate costs you will need to pay at closing. Such costs could include interest adjustments, title insurance, recording fees, points, credit report fees, appraisal fees and settlement fees which are paid to the lawyer or firm who manage settlement.
  • US Department of Housing and Urban Development (HUD) booklet to assist you in understanding closing costs and the Truth in Lending Disclosure.

Approval and Commitment

Upon receipt of a satisfactory appraisal, your lender will contact you with the final approval. A commitment letter will be issued at this time.

Title Search

A title search is required to uncover any possible problems with the legal ownership of the land such as a lien, an unknown heir or faulty land survey. Arrangements for the title search are made by the bank. A one-time fee is paid at closing.

Step 7 of 8 - The Closing

At the closing, loan papers are signed and the rest of your closing costs and down payment are paid.

The lender will establish the closing date. Before closing you should review all loan documents and your purchase agreement.

Step 8 of 8 – The Building Process Begins and a House Becomes a Home

After the closing, your builder can break ground and the home building process begins. Payments are made in conjunction with the advance schedule and an inspection is required before the final payment is made.

Final Inspection

The original Appraiser will verify that the construction is complete. An inspection may be required as a result of something found during the appraisal process. It may also be requested by you, the buyer, to uncover hidden problems or to identify items that you may want the builder to repair.

Converting the Mortgage from Construction to Permanent

After the construction is complete, the Construction Mortgage will automatically convert to a permanent mortgage. However, you may wish to refinance at that time to a conforming mortgage to receive a better rate. This refinance has fees associated with it.