Before You Build: 5 Steps to Your New Home

Remember the Basics Before You Build

Illustration of puzzle pieces and coins forming the two dimensional image of a house
The Puzzle and Cost of Home Ownership. Photo by and © Andrew Bret Wallis/Photographer's Choice RF/Getty Images

Building a new home begins long before the foundation is poured. To avoid costly mistakes during the construction process, start with these five important steps. As you move from dream house to real house, be sure to ask questions and share your progress with people who have gone through the process.

1. Plan Your Budget

Begin now to think about how much you can afford to spend and how much building your new home is likely to cost.

Chances are you will need a construction loan and a mortgage. It's not too early to find out what size loan you qualify for. Also, knowing the approximate costs will help you modify your building plans to meet your budget.

Money is one of the biggest obstacles and may be the most complex piece to the puzzle of home ownership. Why do prices always go up but never go down? If the price of gasoline goes down during construction, why can't that cost savings be passed on to the owner? Beware of banks who want to lend you more money than you can afford—that was one of the reasons behind the 2008 financial crisis. The reasons for "unexpected costs" can make no sense—isn't that why we make plans and hire professionals?

Save When You Build:

2. Choose Your Lot

Whether you are building your home in a suburban development or a site with sweeping ocean views, you will almost always need to choose the land before you select floor plans or other details.

You (and any pros you hire) will need to investigate factors such as soil condition, drainage, zoning, and building codes in the region. Will your house be customized to fit your lot or should you find the right lot that suits your dream home?

3. Pick a Plan

Many new homes are built using stock plans from a printed catalog or an online store.

The builder or a home designer may make minor modifications in room size, window style, or other details. A custom-designed home, on the other hand, is created specifically for the family who will live there and the location (that is, the lot) it sits upon. In most cases, custom-designed homes require the services of a licensed architect.  They ask questions like "Where is the sun in relation to the lot? Where do the prevailing breezes come from? How can the homeowner save on long-term heating and cooling costs?" Whether you opt for a stock or a custom design, you will be wise to choose a plan that will meet your needs for many years to come.

Find the Ideal Plan:

4. Line Up Your Team

Unless you are a homesteader, you'll need a team of experts to design and construct your house. Key players will include a builder, an excavator, a surveyor, and a home designer or an architect. Many homeowners begin by selecting the builder or contractor. That pro then selects other members of the team. However, you may also opt to hire an architect or designer first. The big question is this: how involved will you be (can you be) in the process?

Some homeowners have opted to be their own project manager. If that's the case, you have more control, but you also have to choose the right builder or subcontractors who have worked this way.

5. Negotiate a Contract

Be sure to get a written contract that has been signed and dated by both the builder or contractor and the architect or designer. A contract for new home construction will describe the project in detail and include a listing of all the parts to be included in the house—the "specs." Without detailed specifications, your house will likely be built with "builder's grade" materials, which can be on the cheaper side. Be sure to hash out the specs before the contract is written—as part of the negotiations—and then make sure everything is listed.

Remember to amend the contract if you or your team make any changes to the project later on.

Are you having fun yet?

The steps to building a new home can be an exciting time. Not everyone, however, should build a home. The process is a lot of hard work and disruption in your life and the lives of those around you. Do you find yourself saying, "If only...." A new house or a bigger house or a smaller house may not "fix" a troubled life or relationship. The most important first step might be to analyze your motives. Are you building a house because somebody else wants you to? Is it a diversion from some other difficult problem? Can you handle the additional stress in your life? Why do you want to build a home? Self-reflection may bring about self-awareness—and save you from many headaches.