How to determine your home building budget depends on many factors. Factors that most people don’t understand. But before one plank of wood can be nailed or any concrete can be poured, a budget must be created. Now before we get into detail on this be sure to download the free new home Steps Guide above on the right, it’s fantastic and covers everything you need to know about home building.
How to Determine Your Home Building Budget Factors
Unless the cash is readily available for a home building project, there is going to have to be a lender. Without money, there can be no building project. The first important step if the cash isn’t readily available is to get pre-approved for a building loan.
It should be noted that a construction loan varies slightly from other types of loans. Construction loans often have higher interest rates. The amount of money that will be granted will depend on the credit and income of the borrower. If the borrower already has a home, the equity built up in the home will also be taken into consideration for a loan and can provide additional funds for the home building budget.
Once the loan is pre-approved the amount granted will become the home building budget.It will take careful planning to ensure that the costs stay within or under budget. In fact, it is wise to take 10-15% of the budget and set it aside. This will provide a cushion for any minor budget overruns.
It is important to know what fees there are in the local area. There are local and state laws that must be adhered to. Money may need to be paid out for permits and inspections. These fees will have to be deducted from the budget.
To help ensure the home building budget isn’t breached, it is good to try and break down the costs of all parts of home construction. Most home builders know that each part of the construction of a new home should cost a percentage of the total amount available to build the home. Most lenders will offer this break down to anyone who asks for it.
The next step is to find several types of homes the new home should be modeled after. Once a general idea of what the desired home should look like and how it is to be laid out is reached, it’s time to contact home builders or contractors. The home builder or contractors contacted should be reputable, licensed, and insured. Based on the type of home that is desired, they will then be able to give a good estimate of what it will cost to build the home.
Once the best estimate is submitted it is time to go back and get the loan. It is best if the estimate is lower than the authorized pre-approved amount. This will help to ensure a guaranteed loan approval. Make sure the estimate allows for the 10%-15% which can be set aside for home building budget overruns.
How to Determine Your Home Building Budget Overview:
1. To build a new home you must establish a home building budget.
2. You’re going to need a lender. Get pre-approved for a mortgage or construction loan with this lender.
3. Once the loan is pre-approved the amount granted will become the home building budget.
4. Fees are deducted from the building budget.
To make sure the home building budget isn’t breached, builders break down the costs of all parts of home construction.
5. Get estimates to build your new home from builders or contractors.
6. Once an estimate is agreed upon go back and get the loan.