Two key phrases you’re likely to encounter during a construction loan process are “Architectural Plans” and “Finishing Touches.” Understanding these terms is crucial for ensuring you have a smooth loan approval process and a successful home build.
We will break down these terms and explain their importance in the construction loan process.
What Are Architectural Plans?
“Architectural Plans” refer to the detailed drawings and specifications that outline the design of your home. These plans serve as the blueprint for everything from the layout to the materials used in construction. They’re critical because lenders use them to determine the overall cost of the project, the feasibility of the design, and how much to loan you.
Why Are They Important for Your Construction Loan?
- Loan Approval Process
Lenders require a complete set of architectural plans before approving a construction loan. This allows them to verify that the project can be completed within the budget and timeline you’ve set. Without these plans, lenders cannot accurately assess the risks involved in financing your project. - Setting Expectations
Architectural plans set clear expectations for both the lender and the builder. They outline specific milestones that need to be met during construction, ensuring everyone involved knows what to expect in terms of progress and cost. Having well-prepared plans reduces the likelihood of costly changes or misunderstandings down the road. - Accurate Budgeting
Since lenders use architectural plans to estimate the cost of your home, they help ensure that your loan amount is sufficient to complete the build. Any discrepancies in the plans could result in underfunding, which can cause delays or additional out-of-pocket expenses.
What Are “Finishing Touches”?
The term “Finishing Touches” refers to the final stages of construction when your home starts to take shape aesthetically. These are the small details that bring the entire project together, such as choosing paint colors, flooring, cabinetry, and fixtures. While they might seem like the fun part of building a home, they are also crucial to the completion and final valuation of the property.
How Finishing Touches Affect Your Construction Loan
- Final Disbursement
Construction loans are typically disbursed in stages, and the final disbursement often hinges on the completion of finishing touches. Lenders want to ensure that all aspects of the build, including these finer details, are completed before they release the last portion of the loan. Delays or changes in these finishing elements can hold up the final payout. - Impact on Home Value
The finishing touches can significantly influence the final appraisal of your home. The quality of materials and attention to detail play a role in determining your home’s overall value. If you opt for lower-quality finishes, this can affect both the appraisal and the amount your lender is willing to finance. - Change Orders and Budget Implications
One thing to keep in mind is that finishing touches often involve last-minute changes. Homeowners might decide they want to upgrade countertops or switch to a different flooring option. While these changes can enhance your home’s appeal, they can also increase your overall budget. It’s important to account for this in your construction loan to avoid surprises when it’s time to settle the final bill.
Balancing Both for a Successful Build
Both architectural plans and finishing touches are integral parts of the construction process, and they work hand-in-hand to ensure that your home is built according to your vision and within your budget. While architectural plans provide the foundation and framework, finishing touches bring the home to life, allowing you to personalize it according to your style.
If you’re planning to take out a construction loan, make sure you have thorough architectural plans in place before approaching a lender. Additionally, budget carefully for your finishing touches to avoid costly overruns that could delay the project or stretch your finances. We are here to help if you have any questions give us a call.
