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New home construction: What to know before building

New home construction: What to know before building

New home construction is an intricate process that, according to Mortgage Banker Britt Strum, will test even the most patient of homebuyers.

But those who are up to the challenge can look forward to moving into a brand new home built to their specifications and liking.

We sat down with Britt for a Q&A to learn more about new home construction and how she and the Mortgage team at FNB can help buyers navigate the process.

Headshot of Britt Strum, Mortgage Banker at The First National Bank in Sioux Falls.

Find out what she had to say below, and reach out to Britt when you’re ready to start your home-building journey!

Before we get into the fine details of new home construction, tell us a little bit about yourself.

I started in banking in 2009 and joined First National Bank in 2012, working as a Personal Banker until 2013. I then moved into Mortgage Banking and have been doing that for nearly 11 years now.

That personal banking experience helped me build a foundation where I can see the “big picture” when walking customers through loan options. I help homebuyers focus less on the cost of a house and more on the monthly payments and how the expenses of homeownership truly fit into their budgets.

On the personal side of things, I’m a Minnesota native and a graduate of Northern State University. My husband, Ian, and I have two pups, Josie and Marvin.

A yellow lab and westie dog standing in the grass next to a lakefront beach.

We love traveling and are currently working on attending a game at every MLB stadium (we’ve already checked off my beloved Twins)!

Britt and Ian Strum posing for a picture in front of a river in Italy.

I’m also a proud Junior Achievement volunteer, having done that for seven years now.

Can you briefly explain the new home construction process for those who are new to it?

Our construction process includes a two-time loan closing; we will close on the construction loan before the work begins, and we will close on long-term, permanent financing once the house is complete.

To start the process, you will need to complete an application. Subsequently, you will need to provide three main pieces of information: a lot value/lot purchase agreement, a cost breakdown, and blueprints.

Once the loan is in place, we will receive periodic draws from your builder. Each draw can contain unlimited invoices from material suppliers and subcontractors.

Upon approval of a draw, funds are transferred to the title company, which will then send a check for each invoice along with a lien waiver to show that suppliers or subcontractors have been paid.

Lastly, an employee from the Bank will perform periodic site visits to make sure materials are delivered and work is all being done according to the draws.

The construction loan requires an interest-only payment each month based on the amount drawn throughout the preceding billing period.

What should homebuyers know before starting the home-building process?

It can be a stressful process that will test most people’s patience. You can be the most detail-oriented person and things still may not go as planned.

There are numerous people that contribute to the construction of your new home, and it can be quite hectic to have everyone there at the necessary times — especially when it comes to finishing touches.

I also recommend having a cushion fund set aside, as projects almost always go over budget.

What are the most common mistakes you see buyers make during the process of building a new home?

  1. Not doing their homework beforehand. Knowing what different materials will cost can alleviate hard decisions and help you stay within budget.
  2. Not communicating with the builder throughout the process. Your builder is an essential resource and can offer expertise on all aspects of the project.
  3. Not asking for change orders as adjustments occur during construction, which can lead you to coming out over budget.

What are three to five pieces of advice you would give to prepare someone wanting to build a new home?

“No one is an expert in everything, but together we can make this a smooth, enjoyable process.”

  1. Be as detailed as possible with your builder to get the most accurate bid/cost breakdown.
  2. Do your own homework so you know what different materials will cost — such as flooring, cabinets, appliances, and lighting. There are large variations in the cost of these items, so it’s best to know what your allowance will actually cover.
  3. Patience is key. Mother nature doesn’t always work in our favor around here, so plan for some delays.
  4. Lean on your home industry resources: your lender, builder, designer, realtor. No one is an expert in everything, but together we can make this a smooth, enjoyable process.

What resources would you recommend to buyers throughout the home-building process?

Your builder can be your best resource, so rely on their expertise.

If you have a designer, they can help put a theme together for your house, which can narrow down the seemingly endless options.

There are also wonderful, experienced employees at flooring, cabinet, and counter suppliers who can help you with layout and budgeting.

And, of course, you can always rely on your lender. We keep detailed spreadsheets of initial bids and costs (overages and savings) throughout the project.

How does the team at First National Bank help buyers through the home-building process?

You will work with the same banker from start to finish. Each of our Mortgage Bankers can help with the lot purchase (if it happens ahead of construction), the construction loan, and the permanent financing.

We have a comprehensive view of the entire project. With in-house underwriting, we can adjust quickly to get permanent financing closed on time if any last-minute changes are needed.

Altogether, our lenders have 95 years of experience and have worked through a variety of challenging situations, so you can breathe easy knowing we’re on your team.

A group photo of mortgage bankers Chase Hoffman, Terri Foster, Jill Salter, and Britt Strum.

The Mortgage Banking team: Chase Hoffman, Terri Foster, Jill Salter, and Britt Strum.

What are some of the biggest changes you’ve seen in the housing market over the last 10+ years?

The COVID years, for sure! Low rates caused a chaotic couple of years, with an increase in demand.

We also saw a decrease in material and labor supply, which led to skyrocketing prices.

What do you expect to see from the home construction market this year?

We’ll anticipate similar construction activity to last year. Rates appear to be staying higher longer than we hoped this year, which will keep some from starting construction.

However, there is still a strong demand for housing in Sioux Falls that will continue to spur on construction activity.

If you want to get to know Britt Strum better or determine if she’s the right mortgage banker for you, learn more here. Otherwise, give her a call at (605) 782-5906 or reach out here to start your home-building journey!

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Britt Strum

Mortgage Banker
57th Street

Chase Hoffman

Mortgage Banker
Western Mall

Jill Salter

Mortgage Banker

Terri Foster

Mortgage Banker
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