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You’re ready to build your dream home from the ground up, but where do you start? For most buyers, it begins with a lender. If you’re not paying cash for the build, you need to know how this works.

Most of the lenders you find online, and some of them locally, won’t lend on new construction (if you're building from the ground up and not buying a "new home" in a subdivision). They want to loan money on a known, trusted entity, and building a house is fraught with unknowns.

Here’s everything you need to know about the costs associated with building a house from scratch.

Disclaimer:  This blog is about building a fully custom new construction home on the lot you own. If you're in search for new homes for sale in Davenport, FL for example, you'll likely buy a home in a traditional way. 

Financing is Typical for New Construction

First, visit a local bank and talking about new construction. It will certainly be eye-opening. Most will want you to put at least 10% equity into the deal upfront. Many times, that’s the cost of the lot, so paying for the land first can help get your share into the deal.

Then, make a budget, and do your homework. Find a good builder and let them guide you in choosing some options. Trustworthy builders will show you some choices once they know your budget. Using an online home value estimator can be helpful, but you need to find one for your area as costs are a local factor.

Finally, you will have to qualify for the balance of the cost in a permanent mortgage once the construction is done. Keep in mind the 10% equity injection (that’s your share) and enough income versus your current debt load, which isn’t very hard. The tough part, though, is learning to say ‘no’ and mean it.

Choosing What Goes into the New House

Have you ever gone to the grocery store hungry? If so, it’s likely that you’re guilty of buying things you don’t need and maybe aren’t even good for you. Building a house from scratch can be like that.

It’s not the builder’s job to tell you no. His job is to make your dreams come true. It’s a domino effect: the more you spend, the more he and his crew make, and it’s what makes the world go around, and you thought it was love.

That being said, ask your builder to provide a spectrum of pricing options. For example, for your backsplash, request to see low-, medium-, and high-priced tile so you can make an informed decision rather than just choosing what looks nice.

It’s also important for you to decide where you’re willing to splurge and where you can save. Have you been dreaming of real hardwoods your whole life? Now may be the time to handpick them. If a quartz countertop is beautiful, but you can get the same look with granite, and it’s not where you want to spend a lot of money, then go with the granite. Your decisions are endless, but your budget may not be!

Floorplans Are the First Thing

It starts with floorplans. Do you have one? There are some great ones available online. They are standardized and completely ready for a builder to pick up and run with. Some will even have complete material lists to use.

Perhaps you find it’s a good start, but it’s not quite right. It’s almost good enough, but the living room is just too small and bigger closets would be nice. The rabbit trail begins.

Changes cost money, right from the beginning.

Paying an architect to adjust the plans costs money—thousands of dollars sometimes, depending on the changes. Then, it comes to materials. Make changes wisely.

Kitchens Are Expensive

Kitchens are typically the most expensive room in the house. You have so many choices to make for flooring (vinyl to exotic hardwoods), cabinets (pre-made, made on-site, custom-built features), appliances (builder-grade, stainless, chef’s choices), and countertops (laminate, granite, quartz, glass, cement).

Every choice has a dollar value attached, and just like shopping in the grocery store, you tell yourself you just have to have this, or you only build a dream home once, right? Differentiate between the must-haves and the nice-to-haves.

Remember, the only people who will tell you ‘no’ are yourself and likely the lender, if it gets too out of hand. The final build is going to need to appraise, and these choices add up fast. If you overshoot your budget, you just might need to write a check at the closing table.

Don’t navigate this process alone! The experts at Florida Realty Marketplace have plenty of experience helping choose a builder and other contractors to help build your dream home. Contact us today to speak to a real estate professional.