3 Min Read
How to Set (and Agree) on a Budget for a Custom Home
When you're building a luxury home, it's important to get the best value and service for your money. The success of your project depends on your ability to create a budget that works for you and your custom builder. To create a budget, you'll first need to understand all costs associated with custom home construction. There are three main budgetary factors to take into consideration when designing your forever home.
The cost to buy land in New Jersey varies depending on lot size, location and amenities. Typical costs range between $30,000 and $100,000. Although the cost of land is not high compared to the cost of building your custom home, land itself is not always easy to buy.
Empty land cannot be purchased with a typical mortgage. Buyers must get a special mortgage from a lender specifically for the purposes of buying land. These mortgages often require a relatively high down payment and may also come with higher interest rates. Buyers who want to purchase land sometimes pay in cash or get financing from the seller. Click here for more on finding land for a custom home in New Jersey.
Land Improvement Costs
The cost of the land itself is only one factor to take into consideration when purchasing a custom home. Land improvements often need to be made. These improvements may include but are not limited to:
- Tree removal and demolition
- Road construction
- Well installation
- Septic tank installation
- Utility hookups
The more rural and remote a location is, the greater the costs of preparing the land may be. Once you've found a piece of where you'd like to build, site improvement assessments are required to determine what changes must be made to prepare the land for building.
How to Budget for Home Construction Costs
The cost of building a luxury custom home depends on type of home and “must-have” features. The steps below will help you make a budget that you can afford and your contractor can work with.
Make a List of Must-Haves
Know your priorities and finalize your design in advance. Determine what you want up front and avoid changing your mind midway through construction. Mid-construction changes can affect your budget and may slow down your home construction.
Perhaps you desire an oversized kitchen with stone countertops, top of the line appliances, and beautiful cabinetry. Maybe you need an oversized garage and space for an in-law suite. Though some high-end features do cost more, they also add value to your new home, so you can get the money back if you ever decide to sell.
Not sure what your must-haves are? Look at existing homes in the area where you'd like to buy. Attend open houses to look at materials and discuss pros and cons of choices other home buyers have made. Look at lifestyle magazines and collect pictures through apps like Houzz and Pinterest to help you keep track of the features you like best.
Work With Lenders to Secure Financing
Before you start conversations with home builders about your upcoming construction project, work with lenders to secure financing. Have your financial documents in order for these discussions to keep the process moving and ensure that your lender gets all the information they need to approve you for the best mortgage possible.
Once you're pre-approved, your lender tell you the maximum amount you're authorized to borrow. Your lender should also be able to tell you approximately how much you would spend on your monthly mortgage if you were to borrow the maximum amount.
Hopefully you already know approximately how much you can afford to pay per month on a mortgage payment. Once you know how much you're authorized to borrow, work backwards from that amount until you've determined how much you can borrow without exceeding the maximum amount you wish to pay each month.
Communicate Your Budget With Your Contractor
Now you know what you can afford to spend, communicate that budget with your contractor. If your budget is realistic, your home builder can create a home design that stays within your budget but meets your expectations. If your budget is not realistic, an experienced home builder should be able to tell you up front whether you can afford a custom home at this time.
Luxury Home Budget Tips
With smart planning, luxury homes can be made affordable. There are many things you can do to create a beautiful custom home without breaking the bank. Below are a few ways to save on your custom home building project:
- Opt for a reduced footprint. Ask your builder about features to improve your new home’s energy efficiency. You can reduce monthly utility costs by purchasing a high performance home with smart technology, ENERGY STAR appliances and eco-friendly materials. Work with your contractor to explore appliances and features that are eligible for tax incentives.
- Maximize space. Buy the space you need. Choose the number of bedrooms, bathrooms, and floor plan to meet your exact specifications. For instance, open floor plans make a home feel much more spacious while reducing overall square footage. Don't pay for the cost to build extra rooms you don't really need. Remember that you can create plenty of storage space with built-in cabinets and shelving, which can reduce the home's footprint.
- Make a low key design. Some styles just cost less to build. For instance, if you enjoy a minimalist or industrial design aesthetic, don't overdo the design accents. Farmhouse style homes can fit into most areas well and they can offer simple benefits like open floor plans and transitional features that allow you to enjoy the outdoors.
Ready to Make Your Custom Home Construction Budget? Contact GTG Builders LLC
More than anything else, it's important to work with a home builder with experience and expertise. To find out more about building your custom home construction budget, call GTG Builders today for a consultation. For more information, check out this helpful video we've created on building a custom home budget.