Natale Builders, renowned for our exceptional homebuilding in the Buffalo, New York, area, is pleased to provide practical advice on how to come up with a new-home construction budget.  

Those contemplating building their first home may find the process daunting, especially saving money to build a house.  

In this blog post, we’ll explain the finances and provide a roadmap for those wondering, “How much should I save to build a house?”

Align your budget with your ‘must haves'

The first step in creating a new-home construction budget is determining what your must-haves are. These are the non-negotiables—the things you require of a new house. Maybe you must have a specific number of bedrooms or a gourmet kitchen. Or maybe you require sustainability features such as solar panels.

Once you have a clear accounting of your must-haves, follow these steps:

  1. Align your budget with these necessities. A common mistake made by those building their first homes is underestimating how much their desired features will cost. Understanding the costs of your must-haves and planning a budget around them ensures you’re financially prepared for the reality of your dream home.
  1. Set aside a contingency fund for unforeseen expenses, ideally between 10 and 20 percent of your total budget. Custom homes often have unexpected costs.
  1. Determine which type of financing is required (if applicable). Not all prospective homeowners have the capital to pay for their new houses up front; for some, determining the type of financing required is crucial to solidifying budget plans and providing a clear savings target. Various financing options are available for new-home construction, including construction loans, traditional home loans, and government-backed loans. Construction loans are a popular choice because they’re designed specifically for a new build. They often cover both the land purchase and construction costs, and the loan is usually interest-only during the construction phase. But you'll need to refinance into a standard mortgage after construction completion.
  1. Find the right lender for you (if applicable). If financing is required, you’ll need to find the right lender. This may be a traditional bank, a credit union, or a mortgage company. Each lender has its own set of criteria and loan offerings, so be sure to shop around and compare rates, terms, and fees. Your lender will play a vital role throughout the construction process, from providing pre-approval so you know your budget to intermittently disbursing funds to your builder. A lender that understands the intricacies of new-home construction and is willing to work closely with you and your builder is an invaluable asset.
  1. Understand the full scope of costs. Building a home is not just about the cost of land and construction. Other expenditures such as interior decoration, furnishings, taxes, and maintenance must be factored into your budget. Also, remember to account for unexpected costs, such as overruns in construction, price hikes for materials, or changes in your home design.
  1. Save for the downpayment. While there are loan facilities available for first-time homebuyers, making a substantial down payment can significantly reduce the burden of your mortgage in the long run. Begin setting aside a certain portion of your income towards this specific goal.
  1. Secure the right mortgage. Once you've saved a considerable amount for the downpayment, the next step is to find a mortgage that suits your needs. Seek advice from financial advisors and compare different mortgage lenders in terms of interest rates, fees, and the flexibility of payment schedules.
  1. Create a detailed financial plan. List all your income sources, expenditures, and financial obligations. Prioritize your spending and make a practical budgeting plan. Regularly review and adjust your budget based on changes in your income or expenses.
  1. Cut back and make sacrifices. Reducing non-essential expenses can fast-track your savings goal. Identify areas where you can make cuts, such as dining out, travel, or entertainment, and redirect those funds towards your homebuilding project.
  1. Establish an emergency fund. While focused on saving for your home, don't neglect the importance of having an emergency fund. Life is unpredictable, and having a financial buffer can prevent unforeseen circumstances from derailing your homebuilding plans.
  1. Research, research, research. Stay informed about the real estate market, mortgage rates, and construction costs. The more knowledge you acquire, the better decisions you can make about where and when to invest.
  1. Be patient. Homebuilding takes time. Rushing into decisions might lead to unnecessary expenditures. Have patience. Make thoughtful decisions.
  1. Seek professional advice. Don't hesitate to seek professional advice. Financial advisors, real estate agents, and architects can provide valuable insights that can save you time, money, and stress.

Building your first home is daunting yet rewarding. With the right financial strategies and careful planning, you can navigate this complex process with confidence. Remember that every step you take toward building your home is a step toward a stable and secure future.

Ready to build your custom home? Contact Natale Builders

By taking the time to align your budget with your must-haves, determine the appropriate financing method, and find the right lender, you can save effectively for your dream house and enjoy a smooth homebuilding experience. Natale Builders is always ready to guide you through each step, turning your first home into a masterpiece that fits your unique lifestyle and budget. Contact us today; call 716-580-3318.