How much will it cost to build a house?
Here is the step by step process to get an accurate estimate.
Here is the step by step process to get an accurate estimate.
Building a new home is the largest investment most people will make in their lifetime, so it is important to get it right the first time. The understandable question that we’re asked time and time again is: “What does it cost to build a house?”
As you’ve guessed, it’s not an easy question to answer. But we’ll teach you how.
This guide will take you step-by-step through the complex process of learning what goes into designing and building your dream home, the impact that the lot will have on the design, understanding primary building cost, and making sure that you and your builder are on the same page so that your home construction is on time and on budget.
As you go through each step along the journey to your new, custom-built home, you will need to hire several experts from several disciplines, who will have to work together to ensure that your new home comes together as a whole.
By learning what to expect well in advance, you’ll be able to develop a budget that will cover all contingencies and ensure a relatively stress-free time period while you wait for the day when you can move into your new house and start making it your home.
Everyone has a dream of what they want their home to look like – the number of rooms, the view, the amenities. And they know the setting in which they’d like the home to be placed. The setting is the land on which the home will be built – corner lot in a housing development, close to a lake, with a territorial view, on a slope, etc. The complexity of the setting, and the climate in the region where the home is being built affects the cost of the build.
You may have had a piece of property for years, just waiting for the time when you’re ready to build it. Or you may have purchased a property with structures already on it which you’ll remove so your builder can start anew…or you are looking for an empty lot to build on.
Each instance will have a different impact on how your home will be designed and built, and, again, its ultimate cost.
After all your preparation comes perhaps the most important part of the process – the putting together of the home itself – the crafting of it, you might say – using quality materials and following all building codes, by an experienced and knowledgeable home builder.
Following the instructions in our ebook: A Guide to Hiring a Custom Home Builder will help you choose the right builder for your project.
Our goal is to ensure that you have all the information necessary so you can make informed decisions about every step of the process of building your dream home.
For example, let’s assume that you are going to have a 2,000-square-foot house built and the cost for construction will average out at $200 per square foot.
(The above is just an example. As we’ll explain in the Budgeting for Home Construction section of this course, even two houses being built to the same plan will not cost the same, for a variety of reasons.)
Whether you are having a home built according to a pre-existing plan or a custom plan, you will likely need the stamp of a structural engineer. Many local/state governments require that a structural engineer go through the plans for any new building to confirm that the specifications will work for a certain geographic area.
New home construction is done in stages, and with each stage an inspector will visit the home to ensure it conforms to the International Residential Code (IRC). The IRC is a minimum standard, and your builder should really build to exceed that code. The engineer can take a look at the plans and often help to simplify the structural design, and ensure that the mechanical, electrical and plumbing systems are meshed together properly, which in turn can save both money and time during the permitting process and the construction of the home.
A “New Construction Home Loan” is handled very differently from a loan to purchase an already existing house.
You will interview at least three lenders to see who can offer you the best rates. Once your loan is approved, your builder will “draw” upon that loan at certain specified times to pay for work done. An officer of the lender will visit the home to ensure that the work actually has been done and that everything meets code.
Be sure to talk to each lender you interview about how they handle their loan fees.
Recommended Reading: Residential Construction Loans: 10 Things You Should Know
Professional firms you may need to employ include surveyors to ensure that the lot you wish to purchase has been platted properly, geotechnical engineers (who ensure that the soil on which a home is to be built is suitable), and energy experts should you desire a “green” home.
Local and city governments will require that you have permits to build or install the various systems of your new home. The permits needed will vary from city to city. Some cities can be very highly regulated, others – not so much.
Will an existing building on the plot need to be demolished? You’ll need a permit for that. Building a pool? You’ll need a permit. The list goes on. Prices for each permit will vary. It’s a good idea to speak with your local building department before you begin the process to get an idea of the individual permit costs.
It is up to you, with the assistance of your builder, to ascertain and acquire the required.
You’ll need a permit to demolish any structures on your property before constructing your home. You’ll also need to pay someone to demolish or deconstruct the structures and remove the debris.
We’ll talk about this in more detail below, never fear! Construction costs include the exterior (the frame of the house, the roof, etc.) and the interior (flooring, counter tops, etc.)
Your builder will charge you a percentage of the total cost of the home to build it. This often starts at the 10% range, but may be higher. When you first meet with and interview potential builders, the question of their fee is one you’ll need to ask. (More about this in the next E-mail lesson.)
Once your builder has completed your home, there’s still the “hardscaping” – the driveway, patio and walkways, and the “landscaping” – the irrigation system, laying of sod and planting of trees, as well as outdoor lighting, to be considered.
There will always be debris left over from the construction process on the interior and exterior of the home that you’ll want to have removed / cleaned.
All materials you purchase (or your builder or sub-contractor purchases for you) will come with a sales tax.
Once you begin the purchase of the land on which your home will be built, you will owe real estate taxes.
You will also want to consider taking out a Home Owner’s Insurance Policy as soon as construction on the home actually starts. Ascertain that your builder – and any subcontractors they employ – have their own insurance in case someone gets injured on the job.
There will always be unforeseen expenses, for which you will need extra cash on hand. Always try to budget about 5% of the cost of the home for unexpected costs.
By using due diligence and hiring the most experienced and skilled professionals in each discipline, you’ll make the process as stress-free as possible!