Budget-Based Home Designing

Not only is a loan prequalification FREE, but getting prequalified
is very informal, does NOT REQUIRE any drawings and specifications,
and the lender should be able to let you know approximately
how much you'll be able to borrow BASED ON YOUR ASSETS & LIABILITIES.

While at the lender’s office, pickup a loan application packet.

Pay VERY CLOSE ATTENTION to the application checklist for a
residential loan application, which you’ll follow later.

Gather your application documents but DO NOT APPLY for a construction
loan at this time...ONLY PRE-QUALIFY for a construction loan.
This will indicate what you can afford at this time.

Keep the "description of materials" and "construction cost breakdown"
forms provided by the lender for reference during the design process.

The "description of materials" and "construction cost breakdown" forms
will come in handy as you consider different options for your home design.
These forms are NOT necessary to pre-qualify for a loan.

Use these forms early in the conceptual phase of the home design process
so you can analyze costs and consider your drawings and specifications
from the outset of design development. These forms will eventually be
added to you application once you're ready to apply for the construction loan.

An ADVANTAGE to using these forms early in the home design process
is to remain within the application format required by the bank,
as well as keeping others within this format, too.

You'll find it very efficient to be in conformance with the application
documents right from the beginning of the design/build process
so you won't experience any inconvenience later translating FROM how all
the contractors and suppliers organize their own versions
of the "description of materials" and "construction cost breakdown" TO
how the lender requires you to present the very same information on their forms.

Another ADVANTAGE using these forms is to know from "Day One"
of the design process that the products and labor to create your home style
is within the range of what you can afford to build.

Be certain budgeting begins with "pre-qualification" for a loan.

Whether you work with an architect or contractor, or act as an owner/builder,
you'll want assurances from the architect and contractor that the
materials specified and scope of work described in the
conceptual drawings is consistent with your pre-qualified budget amount.

REVIEW THE CONSUMER TIPS IN THE “SCAM ALERT”
http://ownerbuilder.com/scamalert.shtml

A BUDGET is a financial plan for your entire Design/Build process.

It is the dollar equivalent for all the work it takes
to design and build your new home. You are NOT expected to create
this document accurately at the outset of your experience
so it's best to begin with very general estimates,
and then refine your financial plan as time goes by.

TRY USING THE CALCULATOR AT BUILDING-COST.NET
http://www.building-cost.net/

The primary purpose of preparing a BUDGET
is to understand and control costs; however, it's also a means
to keep all conversations focused on the same topics
and moving forward together using the bank's documentation.

Beginning with the estimates, one is able to guesstimate
the total dollar amount for the style and size of a home on a particular lot.

YOU’LL ALSO WANT TO CONSIDER SITE DEVELOPMENT COSTS
http://www.ownerbuilder.com/buildable.shtml

At the very least a homeowner should be able to consider
if the project is feasible once estimates are made.

The total dollar amount can be broken into two categories:
hard costs and soft costs. Hard costs include labor and
material to build the house. Soft costs include everything else.

The following budget provided below outlines products and services
that one utilizes during the entire design/build process.

The budget estimate for hard and soft costs is a departure point
for considering the scope of drawings and specifications.

This is why you need to keep the "description of materials"
and "construction cost breakdown" in front of you at all times:
so you consistently follow a format that sequentially
follows the phases of work to be performed.

TRY GET-A-QUOTE FOR ESTIMATING COSTS
http://www.get-a-quote.net/

These budgetary considerations BEGIN early in the schema phase
of the design/build process. Consider the initial study
of costs as an exercise in project feasibility.

The initial study of costs is also a means to open dialogue
with your designer, trade contractors and suppliers
in order to more deeply examine how costs
might be reduced or quality of work improved.

Based on your projection of costs, the homeowner should be able
to weigh and consider design/build options. With estimates prepared,
attention can be given to the budget review process:

1-identify priorities,
2-recognize trade-offs,
3-do cost/benefit analysis,
4-revise cost estimate.

You should realize that, at this point in the budgeting process,
this is a very VOLATILE estimate. For instance, if you choose
the "Sub-Zero" brand refrigerator for your appliance package
(and if comparable products are used), then you might as well
accept that once you complete your estimate, you may hold
the price tag on a very high-end, luxury house. If you purchase
the "Maytag" brand refrigerator for your appliance package
(and remain with comparable products), then your estimate will
result in a medium-priced, custom house.

Still another resource provided by Craftsman Books is
the "free trial estimator" download of their estimating program.

You may download a cost book and estimating
program for a free 30-day trial offer.

CLICK ON CRAFTSMAN’S “TRY IT / BUY IT” BUTTON
http://www.costbook.com/

There is a cost range from economy, to modest, to custom, to luxury,
which CORRELATES with the products and materials you choose
to install in your home. Match product/labor choices with the
price category in which you can afford to build.

The following percentage estimate for a construction budget
is in the "ball park." It simply is a beginning point for determining
if the amount you have to spend is even close
to the house you want to build.

PRELIMINARY BUDGET ESTIMATE BY PERCENTAGE OF TOTAL COSTS

All preliminary budget estimates will include material and labor
to complete both rough and finish installation.

The following budget list represents cost categories,
both hard and soft costs, to which you must assign
preliminary dollar amounts for the work to be accomplished.

HARD COSTS

3% Excavation & Site Prep
6% Foundation & Flat Work
18% Framing Materials & Labor
4% Roofing and Storm water
9% Exterior Trim Package
5% Plumbing Rough/Finish
5% HVAC Rough/Finish
5% Electrical Rough/Finish
4% Septic or Sewer Install
4% Water Connect
2% Insulation
5% Drywall
3% Paint Interior/Exterior
10% Interior Trim Package
6% Floor Coverings
4% Appliances
2% Landscaping
5-10% Overhead

100% of Budget for Hard Costs of Home Building

You’ll need to “burden” these hard costs for home building
with the soft costs required to accomplish the work.

This means you need to multiply the total hard costs
by the percentage of soft costs.

SOFT COSTS

4-12% Architects/Designer’s Fee
5-10% Building Permit Fee
10-20% Builder’s Profit
(Varies) Sale’s Tax by State
(Varies) Interest on Construction Loan

20-45+% of Budget for Soft Costs of Home Building

So, if the Hard Costs for your new home total $150,000.00,
then you’ll need to multiply this amount by at least an additional
$52,500.00 to allow for Soft Costs of home building,
for a total of $202,500.00.

This does not include cost of land!

And…don’t forget to consider the lender’s closing costs!

Getting started on a Budget Estimate can be exasperating with no
formal training in the business of residential
architecture and construction.

You can succeed by taking your time, allowing yourself the freedom
to PROGRESSIVELY APPROXIMATE the total scope of work.

At the outset...you don't know where you're going for sure;
but, over time, you eventually get to the point where
you understand what it takes to get your job completed.

You succeed by collaborating with architects, designers, builders,
trade contractors, manufacturers and suppliers to discover
costs of completing your scope of work.

I hope this explanation is helpful.

Utilize the lender’s "description of materials" and
"construction cost breakdown" to guide your collaboration.
Insist that all designers, trade contractors and suppliers
also utilize the same format so there’s one, standard
template to which all will contribute their cost estimates and ideas.

The purpose of this explanation is to help you create a fiscal plan of action
following a process of BUDGET-BASED HOME DESIGNING.

LISTEN TO JULIE MUELLER DISCUSS "CONSTRUCTION BUDGET"
http://www.downhomeradio.com/#construction_budget

Best Regards,

Tom Landis

Owner Builder News
To Comment or Unsubscribe, Reply to this Message.

Email comments to: Owner Builder Services -- Tom Landis Visit the Owner Builder Coach for more free information: http://www.OwnerBuilderCoach.com
Special thanks to Olympic Web Design for hosting.

View our

ARCHIVE

Email Marketing by Constant Contact®