couple with newly built home

Guide to building your dream house: What to expect step by step

Real Estate Advice

by LB Gabriel Posted on April 19, 2021

Take a minute and picture your dream home. What features does it have? What does it look like? What special little details would you include in the design? Your vision is unique, and it’s not something you can likely find already listed on the market. To truly see your dream home become a reality, nothing compares to building a custom home. 

As rewarding as it can be, building a home from the ground up is challenging and complicated (annoying how those things usually go hand in hand, right?). That’s why it’s important to know what to expect to keep things moving as smoothly as possible. Here are some things to consider if you’re embarking on a homebuilding journey.

Figure out how much you can spend on building a home

Unless money isn’t an issue (in which case, congrats!), you’ll need to determine how much you want to spend in total on your new home.

  • According to the National Association of Home Builders, the median price of building a new home is almost $290,000. This number can be misleading, though, and some experts suggest thinking of a custom home price as more of a range than an average.
  • Typically, the cost of building a home is around $100 to $200 per square foot. If you’re interested in a luxury home, this runs around $200 to $500 per square foot.
  • Note that these estimates don’t include the price for the lot, which can vary depending on location. It also doesn’t include the price of labor, permits, design fees, or materials.
  • Because of these factors, building a custom home is considered the more expensive option than buying an existing home or even a newly constructed home based on a standard model design.

The total cost of building a home can vary quite a bit depending on the choices you make, the materials you use, labor costs, and what region of the country you’re in. From contractors to cabinets, charges add up quickly, so consider consulting some professionals, like a home builder, architect, realtor, or civil engineer to help you get an understanding of costs.

Set a realistic budget you can afford

Once you’ve gotten qualified advice, get detailed with your budget. Include everything you can think of that will go into your new home. While materials and labor should be about 75% of the total amount spent, there’s also the cost of the lot, fees and taxes, furniture, décor, landscaping and more.

Don’t forget to put a little wiggle room in there, too. Most people will tell you that they went over budget when they built their custom home. 

Looking for a few quick ways to save some money? Here are some ideas:

  • Have a smaller floor plan. One of the most expensive parts of building a home includes the concrete slab and foundational work. Keep costs in check by making square footage manageable.
  • Research supplies. Get quotes and try to find deals when it comes to appliances, fixtures, and materials.
  • Ask about tax credits. When you use energy-efficient appliances, materials, hot water heaters, and heating and air conditioning systems, they often qualify for tax credits. Ask your builder or check with your local utility. 
  • Save on moving. You probably want to spend your money on your new home, not moving out of your former one. Look for ways to save on moving costs so you can put those hard-earned dollars toward a special feature or upgrade you really want for your new home. 
couple getting a loan for their custom home build

Find the right lender to finance your dream home

Most likely, you’ll need to borrow funds to pay for land and home construction. Look for a bank that has real estate lending options like construction and land loans.

  • Construction loans: These short-term, higher-interest loans pay for both the homebuilding expenses and the land. These are different and a higher risk for lenders than traditional mortgages because you don’t have the home to use as collateral, so you’ll need to have a detailed budget, timeline, and plan in order to gain approval.
  • Land loans: Like the name says, these loans are used to purchase the land. In most cases this will be an “improved land loan,” which means that your land has access to roads, electricity, and water. Again, because there’s no collateral on the property yet, you’ll need a significant down payment and excellent credit rating for approval.

Manage expectations when you’re planning your custom home

It’s fun to list out every attribute you want in a new home, but reality sets in when you see the list on paper – and the prices. You may have to make a few concessions. Hardwood floors, granite countertops, smart home technology – there are some things you’re willing to make sacrifices for and others where you can find acceptable substitutes, especially if it’s something that can be more easily upgraded later.

With home blogs, social media accounts, Pinterest pages, and more throwing #housegoals in your face, it can be tough to figure out what’s worth the investment and what’s mostly hype. It helps to have the right people in place who can tell you if you really need that gift wrapping room or five-car garage.

couple making an agreement with their building contractor

Assemble your dream (home) team

The right house starts with the right people. While some may tell you to find the land first and build later, there are other schools of thought that say you need experts in place before you decide on location. 

Unless you’ve inherited land or already have a lot purchased, it’s typically best to find your builder first. While many people assume that you start with a lot and/or an architect first, this is usually the most expensive approach. Working with a good builder, you can discuss your goals and then find the perfect spot to meet those objectives. 

Here are some tips for finding the right home builder:

  • Do some research and compile a list of reputable builders in your area. You can look at online real estate ads or your local newspaper.
  • Pay attention to the types of homes they build and the price ranges to make sure their style lines up with your own.
  • If you need more help with references, contact a trusted real estate agent.
  • Consider the builder’s experience. How long have they been in business? Are they licensed and insured? Be sure to ask the right questions.
  • Meet the builder in person and have an informal interview. Ask about their preferred process, if they work closely with architects and interior designers, how they conduct their estimating and budgeting, what their project teams look like,about anticipated timelines, and more.

Depending on your builder’s capabilities, you may also need an architect to design the home and provide a blueprint to the builder. But before you hire an architect, check with your builder. Often, builders will use their own architect to draw initial plans based on your needs and design tastes. This helps ensure you get a plan the builder can construct that fits within your budget. As a general rule, you will spend more overall if you hire an architect yourself than if you work on the design through your builder.

While the builder and potential architect should be your first hires, you’ll want to eventually have a realtor handle your lot purchase and former home sale, a real estate attorney for the closings, and a landscape architect to give you a yard that looks as good as your new house.

Find the right lot to show off your custom home

Now that your team’s in place, it’s time to find some land. This may feel overwhelming, so to narrow down your options, think about where you want to live and start researching options in that radius. Be sure to check the property history – what it sold for in the past, development history, and comparable lots. This can help you formulate your offer.

Make sure your builder has a voice in this process. What you see as a beautiful, flat lot they may see as a flood risk. A builder will be able to help you determine if there’s enough square footage to accommodate your house, the lot slope, water issues, tree locations, and more.

Decide on an architectural design

Whether you’re working directly with an architect or through your builder, you still get to choose the architectural style and design that speaks to you. While we admit that not every part of building a custom home is fun and exciting, this part truly is enjoyable because it allows you to finally see your ideas take shape.

If you don’t already know your preferred house style -- modern, craftsman, farmhouse, traditional -- that’s ok. This is a great time to do some scouting. Drive through neighborhoods, take pictures of homes you’re drawn to, find some pictures from real estate websites. There are lots of ways to find inspiration.

Once you decide on a style you like, you can research your own floor plan options online and bring ideas to a builder. Or, your builder likely has some floor plans you can use as a starting point to create your own design.

Make a timeline

Forget what you’ve seen on HGTV. Building a custom home takes time. And patience.

It takes an average of eight months to build a new home, according to the U.S. Census Bureau. This includes obtaining permits, construction, inspections, and the often inevitable delays due to bad weather, supply shortages, and other unexpected issues. 

As you can imagine, the more custom the home, typically the longer it takes to build, so if time is a factor, consider a simpler floor plan.

Be detail oriented

You’ve hired your team, you’ve got a plan in place, the land’s been purchased – time to relax, right? Think again.

No one cares more about your dream home than you, so plan to be involved in the process to make sure things are running smoothly. While we’re not suggesting that you strap on a toolbelt and head to the construction site, there are a few things you can do to make sure your project stays (mostly) on time, on budget, and on plan: 

  • Communicate regularly with your builder.
  • Check invoices and track spending.
  • Make a decision and stick to it. Changing your mind often only adds to your total cost. 
  • Compare progress to the plans to ensure construction is following specifications. If not, it’s important to catch it early and make sure the builder takes responsibility for any costs associated with fixing a mistake made by their team or sub-contractors. 
  • Keep things in writing. There are a lot of moving parts, and while you don’t need to jot down everything, you do need some documentation.
a PODS portable storage container is a flexible storage option

Choose a flexible moving and storage solution

Building a custom home requires a customized moving plan. Delays happen, timetables shift, inspections take longer than anticipated -- there are unexpected occurrences that may put your planned move-in date behind schedule (or, hey, maybe even ahead of schedule if all the stars miraculously align). It’s important that you have a moving and storage solution that can be easily adjusted so you don’t feel rushed or unnecessarily stressed.

For example, with PODS moving and storage containers you can set your own schedule, and you won’t be penalized for changing your plans. What’s more, you can have a PODS container delivered in advance and keep it in your driveway while you declutter and organize before moving out of your home. What if your existing home sells faster than expected and you need to move out before your new home is ready? No sweat, you can simply have your container taken to a secure Storage Center, where your belongings will be safe until you get that certificate of occupancy.

Make a punch list before and after moving into your new home

It may come as a surprise, but even new homes come with issues that need to be fixed or finished. With a good builder, you’ll be doing a series of walk-throughs both before and soon after move-in. This is when you want a keen eye for detail and note every item that needs to be resolved, from paint touch-ups to door adjustments. 

You did it! Time to celebrate and enjoy your dream home

Congratulations. You’ve put in the hard work and turned your vision into reality. Now’s the time to relax, celebrate, and take it all in. You earned it! 

LB Gabriel is a freelance writer and frequent PODS blog contributor. When she’s not on a deadline, you can find her on a tennis court or golf course.

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