How Much Should I Budget to Build My Home

Building your dream home is an exciting journey, but it's crucial to navigate the financial aspects with confidence. That's why we're here to simplify the process and provide you with the guidance you need to budget effectively.

In this article, we'll break down the financial side of constructing a new home to gain a better understanding of the costs involved. Whether you're just beginning to explore the idea of building or you're already knee-deep in plans, we're here to help you every step of the way.

Factors Influencing the Cost

Before diving into budgeting, it's essential to understand the primary components that contribute to the overall cost of building a home:

• Land Purchase: The cost of acquiring the land where you plan to build your home, including associated expenses like closing costs and surveys.

• Site Work: This encompasses preparation of the land for construction, including clearing, grading, utility hookups and permits.

• Construction: The actual building process, including the home plan, plan options, selections and any location-related or non-standard option costs.

• Financing: Costs associated with obtaining a mortgage loan, including closing costs, interest expenses during construction and possibly any contingency reserves.

Example: 

Build On Your Land Budget (All costs are projected costs only and will vary)

Land: $50,000 

Site Work Costs: $35,000

Home Construction Costs: $298,000 

Financing Costs: $15,000

Total Costs: $398,000

Land Purchase

Whether you already own the land or plan to purchase it, there are various costs to consider:

• Loan Balance: If you have an existing loan on the land, include the payoff amount in the purchase price.

• Closing Costs: Expenses such as title policy, escrow fees, lender fees and recording fees. Generally budgeting 2% - 3% more for closing costs will be safe, assuming you are not paying a realtor.

• Survey: Unless you are buying a newly platted lot in a subdivision, you will want to get a new survey of the property. Surveys on 1 - 3 acre lots typically run between $700 - $1,500, depending on existing improvements, easements, how complicated the property boundaries are, etc. 

Example: 

$ 100,000        Purchase price
$     1,500        Title policy and fees
$     1,500        Lender origination and fees
$        750        Survey
$        200        Recording

____________________________________
$ 103,950        TOTAL LAND PURCHASE

Site Work

You can put construction costs into two buckets: 1) vertical construction costs, which we put into our base home pricing, and 2) site work. We do not include site work costs in our base pricing because every lot is different and costs can vary significantly from site to site.

We have written a detailed guide to site work budgeting, that will help you understand what goes into this cost, but the quick list of items that may be needed include: 

• Site clearing and tree removal

• Pad site grading and fill

• Utility hookups and service lateral line

• Well and septic system

• Permits

• Temporary gravel drive

• Concrete drive

• Culvert and drive approach

• Landscaping, sod, irrigation

• Gutters and soil drains

• Water softener and filtration

• Retaining walls

After a customer signs an agreement and pays their deposit, the New Home Specialist will schedule a Site Work Evaluation meeting with a Hedgefield Builder. At that meeting, the Builder will walk through a detailed process to gather information from you about your homesite and your plans for it. Then, your estimator will produce an estimate of site work cost, based on past projects. At this point, you still have work to do in order to pin down the figures, but the estimate will help you to move forward with planning your home. 

If it turns out that site development costs are much higher than you were planning, you can opt to terminate the agreement and get a full refund of your deposit. 

Paying for Site Work

One thing our customers really appreciate is our Instant Equity program, which helps them save money. With this program, you'll only pay the basic cost for your site work without any extra markup. Hedgefield Homes makes this possible by providing you with references, typical pricing, and guidance throughout the process. This way, you'll get the same professional work at a reduced cost.

Here's how it works: You'll be actively involved in the site work process, paying most of the expenses directly to the vendor or supplier. Then, Hedgefield will reimburse you from your site work allowance, which you'll include in your loan. Since site work costs are spread out over time, you won't face all the expenses at once. For instance, if you pay for a well, you'll be quickly reimbursed, and the funds will be back in your account before you need to cover other expenses like permits or a septic system.

We’re committed to ensuring that you aren’t overburdened by these expenses. We can explore other options to alleviate any financial concerns you may have regarding site work payments.

Build

Hedgefield Homes is a semi-custom builder, which means we have created a portfolio of beautiful home plans, and hundreds of options and selections choices our customers can select from to design their dream home.

Build costs are determined by the choices you make during the following steps: 

1. Base Home Plan (with included features) 

2. Plan Options - Add any standard options. If you want to make non-standard adjustments, like moving walls, adding 2’ to the garage, this is the time to do it.

3. Selections - Choose your interior and exterior finish options: fixtures & finishes

4. Any location-related and non-standard option costs - covered below

Location-related costs include the cost of additional travel to farther-out locations, and the higher cost of some materials such as concrete and dirt. Sometimes there are additional requirements in certain neighborhoods, such as dumpsters, additional inspections, or building requirements, that increase the cost to build. 

To get an idea of the selections available and their pricing, you can schedule a walk-through of the Hedgefield Design Studio with the New Home Specialist. They can guide you through the included features and help you begin to budget for your selections meeting.

Typically, our customers spend anywhere from 10% - 20% of the contracted price. 

Financing

Closing Costs is a broad term which includes a basket of costs associated with closing and funding a mortgage loan.  Generally, they can include: 

• Loan costs (origination fee, buy-down points, agency fees, appraisal, legal, clerical, inspection)

• Title costs:  processing, recording, title insurance, misc. Fees

• Other Costs & Escrows:  these are usually prepaid expenses, not added costs. They include prepaid interest reserves, insurance premiums, taxes, and possibly contingency reserves (which you get back if unused)

• Interest expense during construction 

Your lender will estimate these costs for you when you apply for a loan pre-approval, and many of them can be included in the loan itself, so you don’t necessarily need to pay them out of pocket.  Closing costs can vary widely depending on the type of loan (conventional, FHA, VA), and whether it is an interim or permanent loan.  

Some lenders will require a contingency reserve of roughly 5%, which is added to the loan. These funds are not spent unless there is some event which triggers a change order. If these funds are not written into a change order, they are deducted from the loan amount prior to final modification of the loan. 

Hedgefield Homes Flex-Financing

With our Flex-Financing program, you can minimize your out-of-pocket costs by rolling construction interest and closing costs into your loan amount, so you don’t have to pay anything out of pocket beyond your deposit and soils assessment fee. The permanent lender who will fund your long-term mortgage, will provide the information listed above, so that when you get ready to close and move in, you have budgeted correctly. 

The Hedgefield Homes Pricing Process

Once you sign a purchase agreement, this is the what the process will typically look like: 

This process typically takes three to four weeks to complete, depending on the project details and the customer.  

Here is an example of the budget format in full: 

By carefully considering each aspect of the building process and planning your budget early, you can navigate the complexities of home construction with confidence. At Hedgefield Homes, we're here to assist you throughout the journey. Whether it's understanding site work requirements, construction costs, or financing options, our goal is to deliver a successful and stress-free building experience

Use our FREE Budgeting Tool to estimate your total project expenses. Once downloaded, simply click on the cell for guidance on how to better estimate each expense. Click below to download and get started!

Hedgefield Homes Budgeting Tool

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