Planning out your home building can save money, but maybe not time

When Larry Bradford started shopping for a home, he was surprised by what he described as the lack of choices in the Fairfax City neighborhoods he was eyeing.

"There wasn't a whole lot to look at between smaller homes and McMansions, and I didn't want either of these things," said Bradford, whose five-bedroom home was completed late last year. "We decided to build our own house."

For most people, going that route means overcoming some formidable challenges, such as finding a buildable lot, in a suitable neighborhood, for the size of home you want, and securing hard-to-find financing if you need it. In addition, the price of some building materials has started to rise -- framing lumber costs have jumped 43 percent since the start of the year, for example.

On the plus side, land is generally priced lower than it was during the construction boom days of 2005, and it was not getting snatched up as quickly when Bradford was shopping.

Also, labor is cheaper and available. Even some builders that once worked with developers exclusively are more amenable to taking on individual clients. Some have launched divisions within their companies that cater only to consumers.

"In the industry, it's called the 'on your lot' business," said Dan Fulton, an independent researcher who tracks the building industry. "They will offer a select number of models that they will build on your lot whenever you want to build it."

Bradford and his wife, Dana, worked with one such builder, who came highly recommended by friends.

The couple paid $310,000 in cash to buy a half-acre lot that was wide enough to accommodate the model they chose.

"The property came with an old house," Bradford said. But the value was clearly in the land, and tearing down the old house was a no-brainer because it lacked conveniences such as multiple bathrooms and central air conditioning, he said.

They still needed to borrow $365,000 to build the house. Their builder presented them with two choices of lenders, and the one they chose had stringent requirements, Bradford said.

"The lender would not allow us to roll in the cost of demolishing the house into the financing," he said.

Financing first

For many people, the mortgage can be can be a sticking point, and it's a critical first step because it helps determine how much house you can afford.