How to Stay on Budget When Building a New Home
Building a new home can be a great combination of excitement, challenges, and costs. Beyond designing the home with your builder and filing plans, you will be deciding upon everything from layout to location, materials, and colors.
But as your project progresses, so does the chance that your dream-come-true turns into your biggest financial nightmare. We can never forget Tom Hanks and Shelly Long in the 80’s movie “The Money Pit.” While that was a refurbishment and not a new home build, the thought still resonates with many.
That’s why we’ve pulled together some tips to help you stay on budget when building a new home:
1. Budget, budget, and budget again. You’re not surprised by this starting thought, are you? By now you know that building a custom home is the way you’re going to bring your dream to life, and you’ve already chosen a home builder with experience within your budget.
But, go through the plans, line by line. Review every material selection, energy-saving option, and layer in some contingencies. Discuss with your builder and your bank to see how much you can afford to hold for a contingency; 15-20% of your overall project budget may be a target amount. It’s possible that as your home building project moves closer toward completion you can lessen the amount held back, but always prepare for the unexpected.
2. Stick to the plan(s)! After you’ve spent weeks, months, or even longer grueling over the plans to set into motion building your new home, stick with them. Late adjustments can drive added costs whether it means creating a duplication in materials, rush orders and extraneous shipping, changes needed to the design plans, costs for re-filing plans, delays in builds that could leave you responsible for a new mortgage and your current housing, and so many other notes for consideration. Stick to the plan to avoid delays and added costs.
3. Upgrade with caution. If your full design choices were included in your original budget, great. Then you’ve budgeted for them and you’re going to try to stick to them! But, if your homebuilder is outlining design finish options after setting your initial budget, we urge you to proceed with caution.
Yes, you want to build your dream home from the kitchen and master bathroom to your fixtures, flooring, windows, etc. But make sure those upgraded options such as Italian tiles and built-in coffee machine fit into the established budget.
Consider the elements making up the room and how the room itself can fall into a budget. Work with your designer and builder to write a “unit price” or “price per square foot” model so that as you make decisions for each room, they are regarded within the specific parameters you’ve outlined.
One caveat is to consider best options when reviewing energy-efficient decisions. That double-paned window may cost a little bit more upfront, but your savings will be greater when you amortize the energy efficiencies when windows are keeping in the season temperatures as applicable.
4. Be prepared to be flexible. While this may sound contrary to earlier tips, it’s an essential stage you may encounter in the home building process. If a material is no longer available and you need to select a replacement, resist the urge to immediately see this an opportunity to upgrade. In fact, this may be the opportunity to reconsider that particular item in your plan. Or, you’ve toured a similar build and seeing the design in real life no longer resonates as the plan to make your home dreams a reality. Work closely with your builder to review new options, sticking to the original budget wherever possible. Weigh your options as you re-establish each line item as necessary.
5. Maintain trust with your homebuilder. You didn’t enter into the decision lightly to build a new home, and surely did your due-diligence to select a home builder, architect, and/or designer who are highly qualified, with a great reputation both from word-of-mouth as well as resources such as the Better Business Bureau or Angie’s List, and have experience in your region. Your home building team will have current registrations and insurances in good standing and provide paperwork for your review as planned, complete and in response to all of your questions.
6. Stay on schedule. Time is a big factor that can easily increase budgets. Review the schedule together before the onset of the project to make sure the team is on the same page. Are materials on track to deliver as targeted? Have they written in time contingencies for weather-related delays, holidays, or any time constraints that may have been established by the community or development?
Keep your design and building team efficient, including making little changes and helping to pace the project as planned. Sustain open communication with your building team so that there are little to no surprises as your home build advances. This includes replying to their inquiries as quickly as you would want them to respond to yours. With adequate planning before launching your project and effective decision making as the build progresses, you can work toward an on-time completion or better yet, an early finish.
7. Know your homebuilder’s fee structure. Work to avoid extraneous charges throughout your project if your homebuilder holds charges for changes made at a certain stage within the project, for choosing materials outside of their design studio, or any other factor that could unexpectedly impact your budget.
An experienced home builder may offer a number of design services as a complementary benefit. With hundreds upon hundreds of options to consider, there may be cost-savings associated with pre-selected choices and their experience with such may help you to stay on budget.
Building a new home is a major endeavor, one that you didn’t enter into lightly. With careful management of your design and building partners, diligent research regarding materials and timelines, consideration of legal and other associated fees, and commitment to your project as filed, you can stay on budget.