Setting The Budget

One of the first steps in the home-building process should be to determine your financial situation and find out how much money you’ll have available for the purchase of your lot and your new custom home.

The best way to proceed is to make some preliminary financial arrangements before you begin the process of selecting your home designer/architect and before you purchase a lot for your new home. Without a predetermined budget you won’t be in a good position to make those other important decisions.

Your builder can probably introduce you to a few lenders who have a good reputation in new construction lending. Talk to several of these lenders and have them explain the new home construction financing process and the loan products they offer. Loan programs and qualification requirements are ever changing, so it’s important to find out what options are available to you and best suit your needs. A lot of times home buyers find they can qualify for a larger mortgage than they thought they would be able to obtain. Others unfortunately are disappointed to learn that the home they have in mind is beyond their realistic budget, at least for the time being.

One thing is to consider after you have your budget determined is that you need to plan for unforeseen situations. What if after you have everything done and you are ready to begin construction you then decide to increase one of your allowance items or add something to the your new house plans at the last minute. You need to talk to your lender about these types of issues and see how they will handle them. If they are willing to adjust your loan amount what will the change cost you? If they will not adjust the loan, you will be responsible to pay the builder directly for them and if this is the case you will need to plan to have some money set aside to do so.

Knowing your budget ahead of time and then working with your builder to stay within it during the design process will avoid the disappointing situation of going through the process only to find out that they home you spent many months designing is not affordable to you.

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