In the first steps, you will need a site or lot. Usually real estate professionals can be helpful and you may already have your location with a Realtor's help.

You will need the chosen style and size of your new home. Some new subdivisions have model homes on display and you can choose the one you like and that will be the right square footage for your family unit.

Once you have land costs and the home construction costs, you should be able to determine whether you can afford this home. Can you make the monthly payments?

The costs of your home can fall into 2 types. There are hard costs, which includes the labor and materials to build a home. The soft costs include everything else. This budget estimate comes in the first phase of the plan to build a new home.

Estimating costs of many items can be raised or lowered depending on your choices of the appliances, the carpeting, the double or triple paned windows, roof of 20 year shingles or lifetime warranty metal roofing etc. Many costs are higher or lower depending on your choices.

The budget review process involves looking at your estimate of hard costs. You will want to give attention to:

• Identify your priorities, do you want a larger home, a more economic home, a finished basement, or 2x4 walls in the garage and no drywall. Do you want a fireplace, central air conditioning etc?


• Do you know trade-offs? Are you willing to utilize them?


• Have you done cost/benefit analysis?


• At this point you may be able to revise your cost estimate.

You can find your land purchase price, this is a hard cost that may already have been paid or is in the plan for financing.

Contractors will give you a `cost per square foot' dollar figure for your home. These figures are based on the kind of home you are planning. That is, do you want an economy, to modest, to custom, to luxury home? These figures have a wide range and your contractor will tell you the ballpark figure for your choice.

Meet with contractors building homes in the range of your ability to pay. A good rule of thumb would be, housing mortgage or rent should not exceed 1/3 of your take home pay. This may seem like a low number but there are utilities, and all the other living expenses to consider also. Some lenders will stay with this staunchly.

Wisdom guides a prudent buyer to ask the builder for a list of everything covered in this per square foot figure.

Do some research of new homes. How much did they sell for? Subtract the price of the land. The figure remaining should be divided by square foot ABOVE grade. This is finished area. A 1200 square foot basement unfinished has the value of the concrete and roughed in plumbing and electrical etc. This is fairly standard for your area. But look at all the footage above the lawn or grade. This is your figure you should divide into the sales price.

A $150,000 square foot home, with a land cost of $30,000 leaves $120,000 for the cost of the finished area. If this is a 1,000 square foot rambler, then the cost per square foot would be $120.00.

Look at half a dozen homes in several subdivisions to get that ballpark square foot figure. Then compare the builder's cost he has given you.

Also consider that $150,000 mortgage and see if you can handle the payments for a fixed rate 30-year mortgage. There are many lenders looking for your business. It's a good idea to go onto the Internet, and plug that $150,000 price and get their returning offers for the mortgage payment.

Keep in mind that PITI means principle, interest, taxes and insurance. Some loans used not to include those taxes and that bill for $ 600-1500 a year depending on your state, can be an awful surprise come the due date for taxes.

Ask the realtors in a subdivision, what were the taxes annually on that $150,000 home? Get all these figures down on your file of costs for your home. These will not include fences, lawn, trees, shrubs etc. These are costs you can control after the home is built.