Isn't That Rich Podcast

We're wrapping up the journey we've been following for the past year as our very own, Ashley McVicker, built her first home from the ground up. This final part in our 4-part series dives into the culmination of her experience, where she walks us through the process of rolling her construction loan into permanent financing. Ashley gives us a candid recap of her entire journey, sharing the final steps, reflecting on the lessons she's learned, and offering insights you won't want to miss. The big question remains-does she have any regrets, or is she thrilled with her decision?

Joining us is John Streuter, the expert mortgage lender who guided Ashley through the financial side of permanent financing. Together, we’ll explore the key lessons learned, the unexpected challenges, and why proper planning is crucial when building your dream home.

The Extended Timeline: A Reality Check

Ashley began by sharing how her optimistic three-month timeline gradually stretched into ten months. “When I first started, I thought I could get it done in no time,” Ashley recalled. “But reality hit hard, and I learned that building a home is a much longer process than I ever anticipated.”

John explained that this isn’t uncommon. “We typically offer a 12-month construction loan because delays are almost inevitable,” he said. “Factors like weather, availability of materials, and the ongoing impacts of the pandemic have caused significant delays for many projects. It’s not unusual to see construction timelines extending to 18 months or even longer.”

Dealing with Extensions and Interest Rate Increases

Ashley experienced firsthand the financial implications of construction delays. “One of the most challenging aspects was dealing with interest rate increases,” she said. “What started at 4.95% jumped to 8.12% by the time I was ready to close. It was a real shock to my budget.”

John elaborated on why this happens. “Construction loans are typically tied to the prime rate, which has been rising steadily over the past 18 months,” he explained. “When a project is delayed, the interest rates can increase, leading to higher costs for the borrower. It’s important to plan for potential rate hikes when embarking on a construction project.”

The Move-In: Adjusting to the Reality of a New Home

After months of waiting, Ashley finally moved into her new home, only to realize that the process wasn’t quite finished. “Moving in was exciting, but I quickly realized there were so many little things I hadn’t accounted for,” she shared. “I didn’t have curtains, rugs, or even a can opener. It was like, ‘Great, I have a house, but I can’t fully live in it yet!’”

John noted that this is a common experience. “Many homeowners don’t realize how much they’ll need to spend on furnishing and equipping their new home after construction is complete,” he said. “Items like window coverings, floor mats, and basic kitchen tools can add up quickly, and it’s something that’s often overlooked during the budgeting phase.”

Construction Delays: Managing the Unexpected

Ashley’s journey was also marked by several unexpected delays. “I had no idea how much coordination was required between different tradespeople,” she said. “For example, the plumber didn’t just come once and finish the job. They had to come back multiple times, as did the electricians and painters. It was a learning experience in managing a complex project.”

John emphasized the importance of hiring an experienced general contractor to help manage these challenges. “A good general contractor knows when to schedule each trade, ensuring that the project moves smoothly and on time,” he explained. “For those who choose to manage the project themselves, like Ashley did, it’s crucial to stay organized and communicate effectively with all parties involved.”

The Value of Investing in Quality Materials

One of the most important lessons Ashley learned was the value of investing in quality materials and upgrades. “I was initially hesitant to spend extra on things like spray foam insulation,” she admitted. “But now, seeing the significant savings on my electric bill, I’m glad I did. It’s one of those things that pays off in the long run.”

John agreed, highlighting the importance of making informed decisions during the building process. “While it can be difficult to justify additional expenses upfront, quality materials and energy-efficient upgrades can save homeowners money over time and add value to the home,” he said. “It’s important to think about the long-term benefits when making these decisions.”

Navigating the Final Financing: What to Expect

As Ashley transitioned from her construction loan to permanent financing, she encountered some unexpected challenges. “I thought the process would be simple, but there were a lot of details to manage,” she said. “John had to remind me to avoid opening new lines of credit during this time, and there were several steps involved in ensuring everything was in order before closing.”

John provided more insight into this process. “Converting a construction loan to permanent financing is like applying for a new mortgage,” he explained. “We reprocess the loan, gather updated financial information, and order a final inspection. It’s essential to avoid taking on new debt during this time, as it can affect your ability to qualify for the final loan.”

The Importance of Planning and Patience

Reflecting on her journey, Ashley shared her key takeaways. “Building a home is a huge undertaking, and it’s important to plan for the unexpected,” she said. “I learned so much about budgeting, project management, and the value of good communication. While it was challenging at times, it was also incredibly rewarding.”

John wrapped up with some advice for prospective homebuilders. “Building a home requires patience, flexibility, and a willingness to adapt to changing circumstances,” he said. “By working closely with your lender, staying organized, and planning for potential delays, you can navigate the process more smoothly and ultimately create a home that meets your needs and exceeds your expectations.”

Final Thoughts

Building a home is more than just a construction project—it’s a journey filled with lessons, challenges, and ultimately, a sense of accomplishment. Whether you’re considering building a home or are already in the process, take Ashley’s experience to heart: plan carefully, stay flexible, and don’t hesitate to seek advice from experienced professionals. With the right approach, you’ll be well on your way to creating the home of your dreams.