"Normal" practice can be all over the map; some may have the resources to do clearing and dirtwork out of pocket before the rest is finalized. However, your build plans are based on the costs being covered by a construction loan, so just say no. You can tell him that you appreciate his eagerness to get started, but that your build will be funded by the construction loan...which you can't get until there is a building permit. So no digging and no bills run up; it probably won't delay things very much. Given how often builds go over the projected budget and unexpected things crop up, I think you're thinking smart to keep your funds for "in case." :-)

Thank you so much for confirming our gut feeling! Super thankful for your advice!

As a licensed builder, I've excavated before a building permit was issued.

But there was no financing involved and I was sure--as we had completed several nearby homes in the past year--that the municipality would be issuing the permit shortly.

In your case, no way should you take the risk.

Thank you!,

Building permits in various parts of the country take between 2 days to 2 years. Just keep that in mind. Excavation in my area would be $0. If it is such a big cost, how much time does it typically take?

I suspect the variability in time excavation takes is somewhat like the permit variability.

I think if you are stressed about 40% of the excavation bill in cash, you may have other concerns. You do know that loans often fall short of build cost by large amounts, right?

Yes, we do! the quotes our GC is getting for excavation and pouring foundation are significant! We’re talking 80k! This is why we want to wait for the loan!

Actually, one quote is close to 120k

Most lenders don't want any activity occurring on a site until a permit is posted with a mechanic's lien agent listed on the permit. That said, one municipality in which we build issues clearing permits separate from building permits. In that municipality, lenders will generally advance 5% of the construction loan amount when the clearing permit is issued and 10% when the building permit is issued.

Leaving aside whether or not starting before the final permit is a good idea (that really depends on details we don’t have). Many lenders will refund payments made prior to the loan starting. So, you really need to check with your lender.

Additionally, money is fungible so I am not sure that it matters unless this is cash that you are trying not to spend. E.g. If your loan is $500,000 and you are planning on spending $50,000 cash on upgrades, then you have $550,000 to spend on construction and upgrades. It doesn’t really matter which $500,000 pays for construction and which $50,000 pays for upgrades.

Totally! This is def cash we’re not trying to spend. We’ve already spent more than we had anticipated and would like to reserve some for unexpected expenses that the loan might not cover. Appreciate your input very much!

Excavation & grading may be a significant number outside of the home construction. Most lenders don't want ground breaking prior to the loan closing ( as Charles Ross Homes said) unless you have a title company who will cover it.

How soon will the lender close? Are they delayed?

In a local municipality we can't pull the building portion of the permits until after the mass grading is complete & signed off, so the construction loan closes with grading permit.

The lender is waiting for the final build permit to come through! They wont close unless that has been approved by the municipality, which is estimating 6-9 weeks if there are no safety issues with the design. Our lender doesnt have this requirement for grading to be complete, fortunately.