Interest Reserve: The interest reserve is money allocated to pay your interest payments during your construction term. This reserve assures the lender the loan does not go into default and construction is completed.

Contingency Reserve: Another component of the construction budget is the contingency reserve. The contingency reserve is a percentage of the hard costs and is available for cost over-runs. Projects may incur unforeseen costs, such as an increase in lumber prices. These over-runs could be requested from the contingency reserve so you don’t have to pay out of pocket.

Closing Cost Reserve: There is a reserve built into the loan to cover the closing costs to limit the cash out of pocket for the customer. Closing Costs reserve is another component of the lien item budget. Fees are gathered prior to submitting the loan to close and are disclosed on your Good Faith Estimate.

Deciding on the property to build your dream home can be complicated. Homework and research done prior to purchasing the land can save you cash and frustration. Here are some ideas to keep in mind when shopping for land or getting ready to pick your home plans.

Site Plan
Plot plan (shows house, easements, setbacks, septic, slope, etc.)?
Topographical Map (if required on a sloping lot)?
Grading Plan (if required by Building Department)?
Percolation Test (if a septic system is required)?
Septic Plan layout and/or Septic Design if engineered system is required?
Well site, depth, flow rate, water quality?

Utilities:
Where is closest place to tie into existing utilities?
What is the cost of bringing electric/water/gas/sewer to house site?
What is the cost of bringing telephone and cable to house site?
What are connection fees for all of the above from each Utility Company?

Other jurisdictional entities to check into:
Will other entities have a say in your home design and permitting process?
Homeowners Association with Covenants, Codes and Restrictions (CC & R’s)?
Coastal Commission?
Water District?
Department of Fish and Game?
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