Building/Financing Your Dream Home in Omaha, NE – 2019
In the 19th century Sermons Preached at Brighton by Anglican Minister Frederick William Robertson, was written about home. In more or less words, he noted that we as people do not need an elaborate explanation to understand the idea of “home.” He goes as far to say that “Home is the place where we tear off that mask of guarded suspicious coldness which the world forces us to wear in self-defense…a happy home is the single spot of rest which a man has upon this earth…” So, if a home is such a place as Robertson describes it, there is no wonder why we all have a dream of what we want in our home—not just decor items to make it look how we want it to look, but also a strong foundation, reliable structure, dependable fixtures, etc. Home is where we should feel comfortable and safe.
Some new couples go the starter home or the rent-to-own route, while others choose apartment living to save for the future, but for growing families, the dream of owning a home is closely connected to their dream of having a secure place where children have the space to live and grow. Older individuals and empty nesters may choose a home based on where they want to spend their retirement years. When choosing between an older home and building a new house, there are several factors which can affect your finances and the efficiency and safety of your new home.
First, consider the financial side of building a new home. Is it any different from purchasing an existing home? For answers, we reached out to Matt Gutschenritter, mortgage lending officer for Cornhusker Bank, who is experienced with both the process of financing the purchase of a new home and the options available. Describing the overall process, Matt said that obtaining financing to build a new home is not much different than obtaining financing for an existing home. “Basically, at the end of the construction, all parties involved, including the borrower, the builder, the realtors, the bank, etc., will want to have the peace of mind that new owners have their long-term financing in place and ready to go,” Matt explained. “The process starts with getting pre-approved for their long-term financing. Once we have that in place, it’s a matter of having the discussion with the builder to determine who will be taking out the financing for the new construction and putting together a contract. If the builder takes out the construction loan, then we work with the buyer in getting them approved for a purchase transaction once the house is completed. If the buyer/borrower takes out the construction loan, we work with them during the construction process and get them prepared to have their long-term financing set up as soon as their house is built. Upon completion of the construction, we would set up their long-term financing and pay off their construction loan.”
For a buyer, affording the construction process on a new home may limit their options, so knowing some fundamental distinctions between old and new homes is invaluable. “There are benefits to both building a new home as well as buying an established one,” Matt continued. “The most obvious advantage to building is that you are assured to get the features and floor plan that you want. However, when it comes to building, you may not be able to build in a neighborhood that is close to the area of town that you want to be in based on location near schools, work, shopping, friends and family, etc.”
For costs, Matt points out that despite the initial costs of new construction, owners of new homes can save on repairs and insurance. “As far as costs go, it can be more expensive to build than to buy, but not always,” he said. “The initial costs to get into a new construction may be higher, but chances are there should be minimal expenses when it comes to repairs, decorating, and general upkeep. With an existing home, there will likely be the need for replacing the roof, windows, utilities, etc. With a newly built home, everything is built to current code, and therefore should be less expensive to heat and cool. Most people do not realize that Homeowners Insurance is typically less expensive on a newly built home as well.”
While mortgage rates continue to favor buyers, most experts expect rates to rise in the future. “Mortgage rates continue to be at or near record lows,” Matt informed us. “It seems most of the talk around the industry is that the Fed may soon be increasing the Federal Prime Interest rate, but Federal Prime Interest rate is not directly linked to mortgage rates, increases in both usually coincide.”
A common mistake Matt believes buyers make is focusing so much on the initial costs, that they forget to secure a good deal for their long-term payments. “Do not get overburdened with the construction loan itself,” Matt advises. “The bigger financial impact will come with the long term financing. Look for a lender that has your best interests at hand for the long term.”
To help ease clients concerned about future interest rate increases, Matt encourages buyers to ask about interest rate locks, which go into effect prior to a new homes’ completion. “As far as resources go, usually we take out an interest rate ‘lock’ around 60 days prior to the completion of a newly constructed home,” Matt told us. “However, with the threat of rates going higher in the near future, if someone is losing sleep over these interest rates, at Cornhusker Bank we offer a six-month ‘lock’ program to help eliminate this issue.”
Matt encourages potential buyers to visit Cornhusker Bank in person or online for information on mortgage loan applications or pre-qualifications. “The online application has worked well for many customers and their busy schedules,” assured Matt. “It is streamlined and therefore eliminates a lot of the questions, based on the answers given, that the regular paper application presents.”
Because of the expenses of building a new home, many families will require expertise to finance the building of their dream home, assuming nothing on the market meets their expectations. Why buy a new home if an existing home is already available? For a perspective on the risks and advantages of building a new home, we spoke to Austin Toney, mortgage loan originator for American National Bank (ANB). Austin is responsible for advising people considering their financial options when building a new home. He sees the benefits for many buyers, but also has to advise them on how to maintain their finances to avoid biting off more than they can chew.
“The benefits for building a new home are simple. You can customize the home the way you want, have brand new carpet/flooring, appliances, etc. and you will be the original owners of the home,” Austin said. “This is right for many buyers as they simply want to tailor the home to their unique tastes and have something that is brand new.” Despite these advantages, because of the costs of building a new home, Austin councils buyers to take a close look at the housing market. Sometimes, an existing home might offer exactly what someone is looking for. “Deciding whether to build or buy existing is a family decision and should be evaluated carefully. Buyers have a difficult time finding what they are looking for on the existing market which is why they end up building, but sometimes patience is important to see if you can find the right property without having to build. Consider having a timeline on when you need to move. This will help determine if you should buy existing versus building new.”
One of the greatest demands in the market is for small starter homes under $200,000. “We simply do not have enough homes on the market to keep up with the demand from first-time home-buyers and other buyers in this price range,” Austin informed us. “Plus, the cost of new construction makes it unfeasible to build a new home for less than $200,000.” As a result, buyers seeking a small starter home often have to wait for an opportune seller to come along. Furthermore, the housing market is gradually becoming less of a buyers’ market. Austin explained that, although interest rates on homes are expected to start rising, they are currently lower than the historic norm. “We have been in such a low-interest rate environment for the past 10 years. Many buyers have become accustomed to seeing 30-year fixed interest rates in the 3’s, when historically an interest rate less than 8% was considered good. Interest rates are still extremely favorable for first-time home-buyers, as well as those buyers looking to get the move-up house. We have seen a drop in the 10-Year Treasury Note, which has caused rates to edge lower as of late, so if you are looking to buy I couldn’t think of a better time as rates still remain historically low. The economy is doing well with unemployment levels at their lowest levels since 1969. This is great for our country and should mean we have an influx of new buyers as more Americans are employed than we have had in a very long time.”
For those convinced that a new home is the best option for their future, Austin recommends not walking in blind. “Building a new home is very exciting, but can also be overwhelming,” counseled Austin. “When building a home, it is important to do your homework, including checking with your loan officer on financing options, how much money will you put down, and how much you want your monthly payment to be.”
A concern that Austin warns people to consider is their tax requirements: “As lenders, we often see buyers build a new house and then become overwhelmed by the tax burden on the property after the home is fully assessed by the county. When you build a home, you’ll have a lot of upfront costs in taxes. It’s always a good idea to review the tax levy percentage, and calculate what your future taxes will look like.”
Managing debt and a good credit score is critical to avoid paying more than necessary for a home. As Austin explained, “building a new home is an exciting process, but mistakes can be made while the construction of the home is happening. A few common mistakes I’ve seen clients make include taking on new debt, which can affect their ability to qualify for the permanent financing upon completion, as well as increasing credit card balances, which can inadvertently have a negative impact on credit scores and, therefore, possibly cause an increase in the interest rate at the end. My best advice is to put off big purchases and taking on any new debt while building a home.”
Austin also believes it is wise to plan for delays during the construction process of a new house. “My rule of thumb is to add 60 days to whatever the builder anticipates for a completion date. We live in an area of the country that can experience unexpected weather situations causing delays throughout the construction process. This is not the builders’ fault, but we suggest clients allow some cushion in the projected completion date for the unexpected.” Practically speaking, delays in construction will affect when a family can move into their new home, which is another reason why every buyer should consider a timeline for when they need to move.
Austin noted that your different financing options will be affected by the lender you choose. “Some offer construction loans to build the house while others do not. Most lenders offer an extended rate lock program to protect the interest rate during a rising rate environment. However, doing an extended rate lock may be more costly. Another financial option would be to consider saving the money for an extended rate lock to buy down the rate when you’re ready to close on the permanent financing.”
Suppose that, in order to afford a new home, you need to sell your current home in a short window of time? Austin explained how certain financing options can apply someone’s equity in an old home towards their new home: “Building a new home takes time and, depending on if you elect to do an extended rate lock or not, can affect how much your monthly payment ends up being. If you have a property that needs to be sold to qualify, this can be challenging depending on what time of year you need to sell. Many clients will inquire about bridge loan financing so they can use their current equity out of the home for the down payment on the new residence. This is acceptable if they can qualify with all the loans included in their obligations: the departure 1st mortgage, the bridge loan associated to the departure residence, and the mortgage for the new home.”
Building a new home is not a light decision. Austin thinks that, while buyers may have difficulty finding what they are looking for in the existing market, a careful buyer might be able to find their perfect home on the existing market with patience. “This will help determine if you should buy existing versus building new,” he adds.
For the difficult task of navigating different financing options and ensuring that your debt and credit score are optimal, Austin is proud of the options he can offer his clients. “American National Bank is a one-stop shop. We can provide everything from construction financing to permanent financing for your new home build. We pride ourselves on being a top five lender in the Omaha metropolitan area and providing first-class service to our customers,” concludes Austin. Austin Toney can be contacted by phone at (402) 939-5339 or via email at firstname.lastname@example.org.
New homes are typically more energy efficient than older homes, having been built with newer building materials, better insulation, and state of the art technology. Energy costs should be lower in a new construction versus a resale property. Newly built homes are just that—new—and that has definite advantages. Roxanne Bobolz, mortgage loan originator for US Bank Home Mortgage, agrees that a new home will require fewer repairs and less maintenance, which can save money and time. “The buyer gets to select and customize the home to their wishes,” Roxanne confirmed. “An advantage of building new is that you pay for only what you want, whereas an existing home may have features you will pay a premium for even if you don’t want those features. Building a house can give you a level of satisfaction that you can’t achieve through buying an existing home. You have a home you created that matches your style and personality.”
When we asked Roxanna what the factors are that should be taken into consideration when deciding whether to build vs. buy, she said that the biggest drawbacks to building a home tend to be the higher costs and longer timeframe before moving in. “Both can increase during the home-building process,” noted Roxanna. “The typical homebuyer goes 15–20% over cost. As the project moves along, they decide to make changes and those changes add up to additional cost. Know you have the funds available to make those changes. To save both time and money, be sure to maintain open communication lines with your builder and make sure you are happy with the design and specs BEFORE the build begins. Also, remember that building, on average, is a 9- to 12-month process. If you do not have the luxury of time, then buying an existing home is the best route for you. Like I said, there is a higher risk of facing costly maintenance issues in an existing home, but talk with an experienced real estate agent. They can help you decide whether building a house or purchasing an existing home will suit your needs. Rates are still at historically low rates and US Bank offers an extended rate lock program for new construction. The internet provides endless ideas for planning your dream home. Tour open houses. Connect with a reputable builder, realtor, and lender!”
When purchasing a new home, whether building from the ground up or shopping existing options, electric, heating, air conditioning (HVAC), and plumbing systems can all affect your monthly utility bills. These are the bones of the house that you want to have confidence so that your home is comfortable and safe. Depending on location, some homes may require special services. We spoke to professionals in three fields about these special considerations: electricity, HVAC, septic tank systems, and plumbing.
After gaining over 10 years of experience as an electrician, Christopher Langer founded his own company, Langer Electric. As he explained to, when constructing a new residence, electricians have to work closely with other professions. “If you don’t want your home’s construction to be delayed, it’s important to have all the materials and workers lined up on my end,” Chris advised. “We communicate with the architects, the HVAC team, all the other trades involved to move efficiently. Having a good working relationship with the inspector is important. Safety is our priority and knowing what an individual inspector is looking for helps you work safely and smoothly.”
Chris believes that one excellent option open for families building their dream home is improvements in artificial lighting which allow more cost-effective energy usage. “Incandescent lighting is simply outdated,” says Chris. “LED lights offer you a win-win scenario compared to older lights. Their lifespan is longer, they are significantly more efficient, they are so small they can be installed in places where old lighting would never fit, they are safer, and it’s possible to install dimmable LED lights. Don’t like blinding yourself by turning on a light in the dark? A dimmable light would let you flexibly adjust the light to just what you need, and it saves on your energy bill by not using 100% brightness when you don’t need it. I think a family designing their dream home could save around 90% on their energy bill by choosing LED,” Chris shared.
An HVAC system includes both heating in the winter and the cooling in the summer. As marketing manager for Getzschman Heating & Air Conditioning, Gunnar Guenette is aware of how inefficient systems can cost owners more every day of the year. “Probably one of the most important factors that gets overlooked is the duct work and making sure that there is a significant amount of return air flow back to the HVAC system so that it can run efficiently,” Gunnar addressed. “It gets the air pressure at a proper air flow throughout the house.”
When building a new house, Getzschman works closely with the construction crew to make recommendations for the HVAC system. “When we do work on new construction, one of our partners, Ron Getzschman, works with the designer to work through the design for the HVAC system in advance, based on the blueprints,” Gunnar explained. “We’ll write in our recommendations so that it meets specs. We will do a load calibration. You start with the square footage of the house and you take into consideration doors and windows. You want to take into account negative pressure so you won’t feel like there is a vacuum in your home every time you open a door.”
One of the key advantages of a modern HVAC system is the improvements in overall efficiency. “The problem for the older duct work systems is the ratings were lower at that time,” said Gunnar. “So, with current systems, those older duct systems are no longer sufficient. We would commonly add to their duct work. First, the equipment rating is significantly different in how it runs. Now, most of the equipment that is being put in is about 96% efficiency rating. Ten years ago that would have been 80% efficiency. That is the amount of coolness or heat that is lost and not captured in the home. So if the furnace generates 100% pure heat, 20% would be lost in older homes. Airflow is a big factor of this. A lot of people think of it like a refrigerator, but an HVAC system is more like a respiratory system. Imagine trying to put a really heavy cloth over your mouth and trying to breathe.”
Air filtration has also improved in recent years. “We usually go with a filter that’s 4” thick. They used to use 1” or more. If it’s thin and dense, it’s actually harder to allow air through there. Because the 4” filter is less dense, you are getting more filtration with less resistance. You are getting cleaner air and getting less resistance for the furnace.”
To help ensure ongoing energy efficiency, the Getzschman team offer G-Force Membership to all their customers, which includes regular checks on HVAC systems to ensure that airflow and efficiency meet specifications and correct inefficient systems.
Septic Tank Systems
Because many new homes have to be built outside of the center of town, many buyers of new homes in rural and suburban areas may have to consider whether they need a septic tank system. In the event of buying an existing home, this is something that should be inspected prior to purchase to avoid costly repairs or replacements for the new owner. As the office manager for Midland Pumping, Aimee Hoffman understands the hidden costs that can surprise home buyers who aren’t diligent. “We highly recommend considering a certified septic inspection done on any property that has a septic system. This is done separately from the home inspection. Some types of loans will require a septic inspection but most in the state of Nebraska do not, therefore it is up to the buyer to determine if they want to spend the money to do their research in this area. An inspection provides valuable information about the overall state and function of the system,” says Aimee. When inspecting a home with a septic system, Midland Pumping will combine local research with questions to help spot faulty systems. “When we provide inspection services, we work to obtain any information that might be on file with the local county or city departments regarding installation or repairs made to the system. We also encourage buyers to ask the sellers questions about how the system has been cared for overall—how often has it been pumped? Is there any history of back-ups or other concerns? Do they know what size it is? Though the cost of an inspection may seem like an unnecessary expense in the process of a home purchase, it can truly save a buyer thousands of dollars in the future if any concerns about the system can be detected prior to the sale,” she concludes.
Owned and operated by Omaha locals Brad and Lallenia Birge, Big Birge Plumbing will soon celebrate its 7th anniversary of business and the 2nd anniversary of their new commercial space. They also have brought on three new hires this past year, making it a total of 17 on their team!
When building a new home, especially your dream home, plumbing is often overlooked. Many homeowners and some contractors want it done the cheapest way possible without a questioning if the system itself matters. Yes, the kind of plumbing system and the way it’s installed for your new home REALLY matters. It is one of the most important areas of the home that needs to be done correctly, to code, and work performed with the highest craftsmanship. It is not an area one should overlook or find the “cheapest” plumber around. When something goes wrong in your plumbing system, it can cost a lot of money and cause a lot of damage. It’s always best to make sure it’s done right and spend the extra money to get real plumbers that are licensed and do good work versus just going with the lowest bid. Big Birge Pumbing gets calls every day from new homeowners who are out of their year warranty and have issues that wouldn’t be there if the job was done right and to the Omaha code to begin with.
“We mostly take on remodels for residential homes and commercial construction,” Lallenia Birge informed us. “For a new construction project, one of our project managers reviews the blueprints and plans ahead with all the other teams involved.” Lallenia keeps up with recent trends in home remodeling for families and seniors considering a new home or a remodel. “Because of the Americans with Disabilities Act, taller toilets have become more standard. For people who are aging or empty nesters who plan to remain in their home until their older age, I think the taller models are better for safety, comfort, and accessibility.” For examples of new options for homeowners to consider, Lallenia pointed out that a lot of new bathroom and kitchen fixtures can save money and prevent accidental damage to a home: “There are also innovations which reduce water waste for families who want to be less wasteful with resources. Faucets that turn off automatically in case you forget to stop them could save you from flooding your bathroom or kitchen. Water heaters have also become much more reliable and efficient in the past decade.”
Buying a newly constructed home can involve some significant costs during the initial construction phase, but different financing options can make it a feasible option in the long run. Asking questions and involving professionals during the planning stages can identify potential problems for the home before they start, and guarantee the most efficient energy and plumbing costs over time.
When saving up for your dream home, don’t forget to seek professional advice to ensure your investment will prepare you for the long run. Remember, home is where we are able to truly be ourselves—build it right and take care of it and it will take care of you!