How to Budget for a New Home

Stay on budget with Summit Edge Builders’ expert advice on what to prepare for.

Building a new house is an exciting experience and something to look forward to. Having a budget in place is one of the first important steps to take when planning to build a new house and it will give you the flexibility to make changes when necessary. 

If you haven’t already heard, new-home builds have a reputation for going over budget. So to get a lender to sign off on a mortgage, it’s always smart to add a 15 – 20% contingency fee. That will ensure you have room for unexpected occurrences. Plenty of new home builders forget to plan for certain costs such as new gas lines, a deeper foundation, moving cost, or other expenses. 

Unexpected expenses when building a home

Let’s start with unexpected soft costs because they can add up to almost half the cost of building a new home. Soft costs are what you pay for the land, engineering, government permits, taxes, and anything else that isn’t brick and mortar. 

1.    Land and Land Preparation

In most cases, you’ll need to buy a plot of land before building a new home. This cost can be included in the overall construction loan to finance your new home build. It is important to know that before buying the land, there could be some excavating and clearing needed before building. For instance, if you bought a wooded parcel of land, you may have to pay to remove trees and roots. That also goes for leveling, grading, and debris removal. Fortunately, our team conducts free site evaluations to help you make an informed and educated decision before purchasing.

2.             Closing Costs

Everyone’s situation varies, but it’s important to get advice from your mortgage lender and your builder to better understand your closing costs and what you can expect to pay for the entire project. Here’s a list of potential closing costs:

  • Escrow 
  • Appraisal 
  • Home inspection 
  • Attorney fees 
  • City transfer tax, county transfer tax 
  • Title from builder to buyer, title from buyer to buyer’s lender
  • Recording fees
  • Prepaid HOA fee, prepaid property tax
  • Homeowner’s insurance

Once again, you may not have to pay all of these costs, and some will be less expensive than others, but it’s good to be informed and prepared.

3.             Window coverings and furniture

They may seem like an odd item to put into your financial plan, but most people want a lot of natural light in their homes and fail to realize how many windows they actually have to cover. Even low-cost blinds, shutters, shades, and curtains/rods can really add up, especially if you have floor-to-ceiling windows. It might be important to consider the number and size of your windows during the planning process. 

It’s common to build a new home with a few extra rooms to accommodate particular needs, but that means you’ll need more furniture. You also might have old furniture that doesn’t match the style of your new house. One good method for buying new furniture or replacing it is to purchase the most important pieces first because you can always purchase other pieces later on.

4.             Landscaping

You’ll eventually want the beautiful yard you’ve always imagined for yourself, but you don’t need to landscape right away. For upfront costs, most HOAs will require you to lay down sod or grass seed right away, but your other costs can be done in stages. You can always plant trees and a garden later on so that you can build more of what you want, like granite countertops or his and her sinks. Also, you can do most of the yard work yourself or with the help of friends to save a little extra money!

Builder fees

Typically, to get a construction loan, the mortgage lender needs to inspect the floor plan and specifications from the builder to appraise your home and determine how much they will loan you. Our team at Summit Edge Builders makes that process much easier because we offer a free consultation to get you the most home at the greatest value with our proven modular home plans and prefab home kits. 

When you choose a contractor, it’s important to know all the components of the construction they perform. If you can find one that secures the building permit, does site preparation, excavation, foundation, exterior add-ons, septic, electrical, plumbing, decks, flatwork, and the driveway, then you’ll get a better idea of the entire cost. Our experienced, dedicated team does all that and provides you with estimated costs for the land, home, and build-out costs.

Final Word

Remember that there is a space between frugal and extravagant. You don’t have to be miserable in the heat during the summer and you don’t have to splurge on the top-of-the-line A/C unit. It’s important to budget your finances for the things you want, but sometimes there’s an attractive alternative that could save you the headache of going over budget down the line. Through working with our experienced team of professional contractors, you’ll get the house of your dreams within your budget.

If you’re looking to build a new home with a general contractor that’s dependable, professional, and stays within your budget, contact Summit Edge Builders at 303-481-2005 or fill out a contact form for more information.