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Determine Your Budget

Determining the budget for your custom home will allow you to bring your dream of a custom home to reality.  The budget will help you determine square footage, based on averages of square foot cost in the area.  It will also allow you to determine the budget for features, upgrades, and the lot. 

Things to factor into your budget include:

  • The cost of the land

  • Local fees and taxes

  • Design and engineering fees

  • Home construction

  • Landscaping costs

  • Furnishing

  • + a contingency budget

The Costs

Upfront costs

The upfront cost to building a custom home is your down payment, the closing cost for the loan, and plans/blueprint costs.  

Being mindful of the upfront cost and the overlapping costs will alleviate some of the stress of building a new home. Closing costs, down payments, and paying on a construction loan while paying for your current place of residence are the major costs to consider. 

Down payments are typically 20% of your construction loan. The construction loan usually includes your land and construction costs.

  • Down payments are typically 20% of your construction loan. The construction loan usually includes your land and construction costs. 

  • Closing costs when purchasing the land and with your lender. These can range from $5,000-$8,000

  • Architectural Plans cost range depending on the level of detail, customization, and required work from the architect. They can range from $5,000-$100,000. Talk to your builder about specifics to determine your cost range. 

Costs during construction

Construction loans are different from traditional mortgages and can be unfamiliar territory for many people.  

Construction Loan 

During the construction process, you are paying interest only on the amount of money you have "Drawn" from the loan. 

Your builder will put together "Draws" during the construction process. These are turned over to the bank, then they issue checks to the parties involved in building your home. Each draw removes money from the loan for your home. The amount "drawn" from the loan is what you pay interest on. These monthly payments are out of pocket costs to consider when starting this journey.  

When you are done building and the last draw has been taken, your loan transitions into a mortgage loan with set principal and interest rates as determined by you and your lender. 

Getting a loan

 Securing a construction loan allows you to buy the land and start building your home. Talk with your builder or realtor as to how these loans are different from a mortgage and when they become the mortgage we are all used to. 

Have your credit checked and make sure any errors have been corrected. 

Meet with multiple lenders to find the best rate. Checking with your builder or realtor for their suggestion of lender is a great option as well. 

Consider mortgage options.  Fixed-rate, variable, 12 or 30 years, FHA or traditional.

There are many steps and processes involved with the money side of building a custom home. Speaking with professionals will help to answer any questions you have. 

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