Tag Archive 'affordability'

Apr 14 2009

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Determine Affordability when Planning to Build a New Home

Filed under Building Budget

Have you decided to take the plunge and build a new home? If you think you are ready for the challenge, the following tips will help you make the best decisions when it comes to building a new home you can afford.

  1. Begin by getting several bids or estimates from contractors for the construction of the home plans you’ve selected. Check with lumberyards and family and friends for recommendations of reputable builders in your area. Don’t assume that the cheapest estimate is saving you the most money. Be sure to compare the quality of materials used in each estimate, and note differences if one bid includes something that another one does not.
  2. Determine what you can afford. Do your research by looking at homes that are comparable to you future home in size and cost to build and estimate your total monthly housing costs including utilities, taxes and homeowner’s insurance.
  3. Find out how much you should expect to pay in closing costs. Closing costs include a variety of fees such as fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowner’s insurance.
  4. Determine how your future home fits into your budget. Financial advisors recommend that buyers spend no more than 28% of their income on housing costs annually.
  5. Finally, look at the big picture. Building a new house is a great way to build wealth, but maintaining your investment can involve a lot of labor and be expensive. Consider what you will spend to furnish your new home, purchase appliances and landscape your yard. Consider the costs of unexpected expenses such as plumbing problems or roof repairs in the future. Will you be paying a lawn service to mow the lawn once a week or do you plan to save money by doing it yourself? It is important to plan ahead for these costs and expenses rather than finding you’ve drained your bank account and you still haven’t purchase a washer and dryer and the grass in the front yard in two feet tall.

So, before you jump feet first into building a new home, be sure to do your homework where finances are considered. Select and build a home that will fit your budget rather than a dream home you might not be able to afford.

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