Construction Terms to Know Before Building
Before building your dream home, it’s important to understand construction terms that will come up throughout the build process. We’ve gathered a list of essential keywords and defined them below.
On-your-land vs. On-your-lot
You’ve probably heard on-your-land and on-your-lot homes, but what’s the difference? In essence, both terms mean the same thing. A builder will construct a home on the customer’s existing or to be purchased land or lot. Only difference between these terms is a lot usually refers to a designated lot within a developed community. While land can mean any stretch of property someone owns, usually in more remote areas.
Sweat Equity and Equity Builds
Sweat equity, sometimes referred to as equity builds, is the increased value of your home as a result from work done by the homeowners during construction. Sweat equity can help your bottom line, but the tradeoff is hard work and time. Builders’ sweat equity programs can include anything from site preparation to permitting to connecting utilities to exterior and interior painting. Work can be completed by the homeowners or by hiring subcontractors to handle the heavy lifting.
Turnkey vs. Non-Turnkey
With a turnkey home build, the contractor assumes the responsibility to coordinate and manage the entire construction process from excavating to final inspections. The contractor is obligated to fulfill the project management, scheduling, and budget allocation duties. So, in turn, a non-turnkey home build means you, as the homeowner, will handle the responsibilities listed above. While doing the work yourself may save you money, it might be at the expense of your mental health as it can be quite stressful and time consuming.
Construction Loan vs. Traditional Mortgage
Home building financing terms can be daunting, but here we’ll explain the different terminology to make it more transparent. In new construction, you’ll need a construction loan to build the home instead of a traditional mortgage. With a construction loan, you’ll be borrowing money throughout the build during what is called the draw process to pay for labor and materials. During this time, you’ll pay a monthly interest only payment to the financial institution based on the percentage of money drawn. This saves you money by not having to pay your full mortgage payment during the build months.
There are different types of construction loans to choose from. The most popular is the construction-to- permit loan where the initial loan is the construction loan. It will then be converted into a permanent mortgage after construction is completed. This loan type secures your interest rate and you’ll only pay a one-time closing fee. The other option is a construction only loan. This type of loan will get you through the construction process, but once it is completed you will need to find a traditional mortgage with its own interest rate and closing costs.
Fixed Rate vs. Adjustable Rate
Whether you chose a construction-only or a construction-to-permanent loan, you’ll need to consider whether you want a fixed or adjustable-rate mortgage. Both types of interest rates have their advantages and disadvantages. With a fixed-rate mortgage, you’ll have a stable monthly payment and they’ll never be any surprises. On the other hand, an adjustable-rate mortgage adjusts as the interest rate does. So, if the interest rate decreases, you’ll have the advantage of paying a lower monthly payment. On the flip side, if the interest rates increase, you’ll have a higher monthly payment which can only be changed by refinancing to a fixed rate mortgage.
Pre-approved vs. Pre-qualified
While pre-approved and pre-qualified sounds like they could be interchangeable, they actually mean different things. If you’re pre-qualified it means a lender has given an estimate of what you may be able to borrow based on information you have supplied them. A pre-approval holds more weight than a pre- qualification. During the pre-approval process you’ll need to fill out a mortgage application and a credit check will be done. This gives you a definite answer on how much you can borrow and at what interest rate.
Custom Home vs. Semi-Custom Home
A true custom home is one that is designed from scratch and all the finishes, colors and specifications are decided by the homeowner. With a custom home, your options are limitless. On the other hand, a semi-custom home allows the homeowner to pick from existing plans and modify them by selecting builder-chosen options. A semi-custom home can be a much more budget-friendly option as pricing tends to be more standardized.
Both a custom home and a semi-custom home, can be a design-build. A design-build uses a single firm for the architect and general contractor. This promotes collaboration and unification between both fields and provides a seamless experience for the homeowners.
Stick Built vs. Modular or Manufactured
Stick-built homes are constructed onsite using local laborers and materials. A modular or manufactured home is built offsite, usually in a factory, and then delivered to the jobsite in pieces to be assembled onsite. While a modular or manufactured home may take less time to build, you’ll be sacrificing customization as these usually have limited layouts.
Floor Plans
Floor plans are scaled drawings that are created by an architect or draftsman. When you first start looking at homes, you’ll probably be provided floor plans to review the layout and flow of the home. Before you finalize the plans and submit them to the building department, you’ll need detailed drawings that provide exact dimensions including wall sections.
Flat Lot vs. Sloped Land
Ideally, all homes would be built with flat foundations on flat land. But with the typography of land, that often isn’t possible. If your home is being built on sloped land, then you may need steps in the foundation. A stepped footer is poured at different levels and will look like a set of steps as the elevation changes.
Warranty vs. Punch List
A punch list details items the homeowner has noted that don’t meet original specifications or need to be fixed prior to them occupying the home. This list is usually created during the final walkthrough with the builder’s representative. A warranty item is an issue that needs fixed after the homeowner has moved in. Each builder has their own warranty program that specifies what is and isn’t included and for how long the warranty is offered. Here at Tailored Homes, we offer a one-year limited warranty on the purchase of your new home, and we make it easy and convenient to submit a warranty claim online.
At Tailored by Woodhill Homes, we want to make the process as easy as possible, and our staff will work with you every step of the way to educate you on the new construction process. If you’re ready to schedule an appointment with our knowledgeable team, click here.