The Real Estate Encyclopedia
How Much Can I Afford?
Category - Home Ownership Questions - Building Your Home FAQ's
Talk to your lender or financial advisor and base your plans on what you can easily afford ask the lender to pre-qualify you. Once you have identified your overall budget you can move forward and obtain an estimate for the construction of your dream home. In order to establish an estimated cost, you need to know the square footage of your new home.1

Many builders are able to provide you with a building cost per square foot, based on a planning set. Once you identify your favorite home plan (search the internet or visit Homeplans.com), you can order a planning set for around $100.

If you are planning to hire an architect, remember the design will cost between 10% and 15% of the construction cost. In this case, you will need a general idea of what your dream home will look like and approximate square feet.

The building site affects cost as well (for example, if the site is on a steep hill, it may be very expensive to install the septic system or if there is a lot of rock, removing the rock will add greatly to your building expenses.) Before you get a construction estimate, you should know what the building site looks like and have conducted the necessary due diligence to identify building issues (percolation test, rock, general terrain, etc.)

Once you have an estimate, have your lender approve your loan. Make sure you include enough funds to cover unanticipated expenses. Once you are approved, provide the builder(s) with your home plans and get a detailed breakdown of all expenses. Go over every detail with your builder, including any allowances for fixtures, appliances, paint, etc. Be sure the plans are exactly as you want them and keep in mind any changes will increase the construction cost.

By sticking with your original decisions and avoiding later upgrades, you will avoid the nightmare of exceeding your construction budget.


References
 
Category(s)
Home Ownership Questions - Building Your Home FAQ's
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