Over the last several years the inventory of available homes has been extremely low and the competition to buy the homes that do come up for sale has been fierce.
This has led a lot of buyers to consider New Construction Homes. Building a new home can be exciting but it can also turn into an absolute nightmare if you don't have plan from start to finish.
One of the first steps is to meet with a lender who specializes in New Construction financing , this will help you get pre-approved and create a budget for your new home. This is where the 70/20/10 Rule will come into play.
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The base price of the home or the cost to build the house should be 70% of your total budget. The price of the land or lot should be 20% of your budget and the final 10% should be earmarked for upgrades, improvements and potential surprises.
Let's say you have a $500,000 Budget. You would budget $100,000 for the lot, $350,000 for the base price of the house and $50,000 for upgrades/overages.
The base price of the house will include everything needed to construct the house and will include the allowances for things like flooring, tile, counters and lighting.
The lot will obviously include the price of the lot, this is potentially a place where you can possible save a few $$$ to put towards other things by choosing a less expensive lot. When choosing a lot, you should expect that walkout lots will be the most expensive, Daylight lots then lots with below grade basements will be the least expensive. Other factors that may make a lot less expensive are backing/front to a busy street, odd shaped lots or be right at the entrance.
The last 10% of your budget should be earmarked for the best reason to buy a new home and that is upgrades that make it yours. This is upgrading carpet, maybe a nicer quartz for the counters or a special backsplash. But before you get crazy on the upgrades you need to beware of the potential overages.
When budgeting for a new home there is nothing that will destroy your budget is unexpected overages. Things like added excavation charges due to subsurface rock, the need for piers due to the ground being too soft or rising costs like lumber and concrete. These costs can quickly eat into your upgrade budget if you do not plan for them.
If you are in the beginning stages of planning to build a new home, let's meet as this is just one tip to successfully building your new dream home.
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