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Steps to building your first home

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Building a new home involves a lot of trust. Trust in yourself to make good decisions and trust in your builder to turn your dream into a reality. It is equal parts exciting and daunting.

The good news is there is a lot you can do to make the construction process as painless as possible. It won’t be simple – in fact building a new home may be one of the most difficult things you will ever do. But with good planning and research you can give yourself the best chance at a great result.

Follow this handy guide to building your first home to avoid any mishaps and common pitfalls.

Budgeting Phase

To build a new home right, you need to budget properly. This phase is crucial because it determines what exactly you can afford.

Step 1: Get pre-approval for a construction loan

The first steps to building your own home is finding out how much you can borrow. Going to a lending specialist and getting pre-approved for a loan is the best way to go about that.

Doing this will help determine where you can buy and the type of house and land you can afford. You’ll most likely require a construction loan, which is an interest-only loan that provides you with access to financing progressively to build your home in stages and keep repayments as manageable as possible.

Knowing the exact amount you can borrow will help you narrow down your search for a neighbourhood, type of home, and the like. A pre-approved loan also tells sellers that you mean business and will be less likely to withdraw.

Step 2: Look at government grants

The State and Territory Governments offer a lot of different grants to home buyers to incentivise their home purchase. The type of grants and eligibility criteria vary depending on which State or Territory you live in so it’s best to do your research on the specifics.

Some States and Territories offer a one-off grant payable of up to $15,000 to the home owners that fit the eligibility criteria. There are grants available for first time home buyers or builders, home building grants, and more depending on the location. See if you qualify for any of the grants available so you can better plan your budget.

Step 3: Finalise your budget

Once you’ve gotten pre-approved and checked out all the grants available to you, it’s time to work out your total budget. Don’t forget to consider additional costs like stamp duty, moving costs, and other fees. Figure out how much you can actually spend on building your first home to avoid disappointment in the future.

If you can’t borrow enough money to build the home you really want, you might want to consider renovating your current home instead or waiting until you accumulate enough savings or borrowing power.

If neither of these options appeal to you, start working out what you are willing to compromise on (for example, the size of the house) in order to make building a new home a reality.

Remember, you can always make plans to extend down the track, working with your builder from the outset to allow for future works.

Planning Phase

Now that you have your budget down, it’s time to ask yourself the tough questions. There is little-to-no chance of getting what you want if you’re not clear on what that is in the first place.

Step 4: Find the right location

Location. Location. Location. It’s so important people are compelled to say it thrice. Where do you want to live? The last thing you want is to construct your dream home in an area or on a block of land you’re ultimately not happy with.

Think about convenience, long-term needs, and future needs. You want your home’s location to suit your lifestyle needs.

Here are some key questions to ask yourself:

  • Does the neighbourhood have the amenities you want?
  • How accessible is it to work, hospitals, stores?
  • What are the nearby neighbourhoods like?
  • Does the area have visual appeal?
  • Is it close to public transportation? Is there traffic in the area?
  • Is it close to any schools?

Consider what you want in a neighbourhood and take it from there. Remember, you can change the colour of your house, its furnishings and furniture, but you can’t change where it is.

Step 5: Know all your options

Whether it’s the city, the country or the coast, consider the size and type of blocks that will be available and how this might affect the sort of house you can build.

Vacant blocks in Australian capital cities are rare, so you’ll more than likely have to factor in the cost of buying and demolishing an existing home and all the council approvals and permits required if you want to live in the city.

Alternatively, buying a house-and-land package in a new development might take some of the stress out of building your first home. Here, houses already meet the requirements of the block and many of the design decisions have already been made, with room for customisation.

If constructing on a vacant block, site and soil tests will need to be conducted to check for things such as underground rocks that could significantly affect building costs.

Remember the steeper the slope the higher the building costs, so what you might save on land you will likely end up spending on construction. Retaining walls are also a big expense, so be sure to understand where these might be needed and how much they will cost.

Step 6: Features to consider when building a new home

How many bedrooms and living rooms do you want? Consider how everyone in your home will be using the different rooms and how these can be repurposed over time.

A playroom today could become a media room tomorrow. Or maybe you really want an extra living room for the kids to have their own hangout space when they’re older. A fourth or fifth bedroom might not seem necessary now, but could it be in five or ten years?

Moving house just for another bedroom when you could have included it in your build from the start is not a situation you want to end up in. On the flipside, if the kids are already older and looking to move out in the not-too-distant future, could you settle for a smaller house that’s easier to maintain?

Print out three copies of your house plans and date them now, five years from now and ten years from now. Designate rooms according to how you think they will be used at each stage of your life and find anything that needs to be addressed before work begins.

Building Phase

These are the final, and most exciting, steps to building a house! You’ve got your budget, you’ve planned it all out, now it's time to make your dream home a reality.

Step 7: Choose the right designer and builder

Now is the time to reach out to your social network and ask for recommendations. With so many designers and builders to choose from, good word of mouth will help set you on the right track. If recommendations come up short, consider experience and a demonstrated ability to deliver the type of home you’re after.

It’s essential to find a designer and builder you feel comfortable with to avoid ongoing issues during the design and construction process. If you’re buying off the plan, display villages will give you an excellent overview of the different builders and the types of homes they offer. Just remember display homes are usually built with all the added extras, which come at a cost.

Make sure you have a thorough understanding of what is included in the base price of the home. Items such as flooring (which some people choose to do themselves) are often excluded and can add thousands of dollars to your build. Same goes for driveways and landscaping.

Finally, be prepared for some things to go wrong. Maybe they could’ve been avoided, maybe they couldn’t. Just remember, how you choose to react to these problems or manage them is up to you.

Approach any mishaps with a calm and clear mind and keep the big picture – your dream home – in view. Hopefully all the hard work will have been worth it.

Step 8: Apply for your home construction loan

You can turn your pre-approved loan into a formal loan application. Or you can shop around for the lowest rate loans to maximise your budget. It depends on what’s most convenient for you.

Finance your first home build by talking to a lending specialist and getting your construction loan approved. Getting the right financing will make or break your home build so make sure you’re choosing the lender that best suits your financial needs.

For a quick loan application, make sure you have the needed documents on hand. Always keep in touch with your lending specialist if you have any questions. It's better to ask now than months down the line when you’re halfway through building your first home.

Also, make sure you understand how payments will roll out to the builder while the home is under construction, especially if you are using a construction loan. On-time payments help keep building works on track and avoid delays.

Step 9: Keep an eye on your home construction

Be involved during every stage of the construction process. Being hands on and keep up with any changes to the original plan. This helps make sure the construction is on time and on budget.

This also helps you be more aware of any updates to the timeline and budget. You’ll better understand what exactly is going on with your home construction and what you should expect. No one likes getting blindsided, especially with something as big as building your first home.

Keep records of the project and regularly discuss the home construction with the designer and builder. You can visit the site from time to time or request for photos throughout the project.

If you don’t have time and still have the budget, hire an independent building consultant to check on things on your behalf.

Step 10: Move in!

By this step the house has been completed, the final payments made, and all relevant warranties, certificates, and documents have been provided. All you have to do is collect the keys and move into your new home!

Ready to build your own home?

The first step is getting your financing in order. Learn more about our low rate construction loans by getting in touch today! Our friendly lending specialists will be more than happy to assist you.

About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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