(The above is just an example. As we’ll explain in the Budgeting for Home Construction section of this course, even two houses being built to the same plan will not cost the same, for a variety of reasons.)
Structural Engineer Fee
Whether you are having a home built according to a pre-existing plan or a custom plan, you will likely need the stamp of a structural engineer. Many local/state governments require that a structural engineer go through the plans for any new building to confirm that the specifications will work for a certain geographic area.
New home construction is done in stages, and with each stage an inspector will visit the home to ensure it conforms to the International Residential Code (IRC). The IRC is a minimum standard, and your builder should really build to exceed that code. The engineer can take a look at the plans and often help to simplify the structural design, and ensure that the mechanical, electrical and plumbing systems are meshed together properly, which in turn can save both money and time during the permitting process and the construction of the home.
A “New Construction Home Loan” is handled very differently from a loan to purchase an already existing house.
You will interview at least three lenders to see who can offer you the best rates. Once your loan is approved, your builder will “draw” upon that loan at certain specified times to pay for work done. An officer of the lender will visit the home to ensure that the work actually has been done and that everything meets code.
Be sure to talk to each lender you interview about how they handle their loan fees.
Recommended Reading:Residential Construction Loans: 10 Things You Should Know
Potential Fees from a Variety of Professional Firms
Professional firms you may need to employ include surveyors to ensure that the lot you wish to purchase has been platted properly, geotechnical engineers (who ensure that the soil on which a home is to be built is suitable), and energy experts should you desire a “green” home.
Local and city governments will require that you have permits to build or install the various systems of your new home. The permits needed will vary from city to city. Some cities can be very highly regulated, others – not so much.
Will an existing building on the plot need to be demolished? You’ll need a permit for that. Building a pool? You’ll need a permit. The list goes on. Prices for each permit will vary. It’s a good idea to speak with your local building department before you begin the process to get an idea of the individual permit costs.
It is up to you, with the assistance of your builder, to ascertain and acquire the required.
Site Preparation Costs
You’ll need a permit to demolish any structures on your property before constructing your home. You’ll also need to pay someone to demolish or deconstruct the structures and remove the debris.
- Other potential costs – questions to ask:
- Does the lot need need to be graded?
- Will you need a brand new septic tank?
- Will power and water hookups need to be added?
Primary Construction Costs
We’ll talk about this in more detail below, never fear! Construction costs include the exterior (the frame of the house, the roof, etc.) and the interior (flooring, counter tops, etc.)
Builder / General Contractor Fees
Your builder will charge you a percentage of the total cost of the home to build it. This often starts at the 10% range, but may be higher. When you first meet with and interview potential builders, the question of their fee is one you’ll need to ask. (More about this in the next E-mail lesson.)
Hardscaping and Landscaping
Once your builder has completed your home, there’s still the “hardscaping” – the driveway, patio and walkways, and the “landscaping” – the irrigation system, laying of sod and planting of trees, as well as outdoor lighting, to be considered.
There will always be debris left over from the construction process on the interior and exterior of the home that you’ll want to have removed / cleaned.
All materials you purchase (or your builder or sub-contractor purchases for you) will come with a sales tax.
Real Estate Tax and Insurance
Once you begin the purchase of the land on which your home will be built, you will owe real estate taxes.
You will also want to consider taking out a Home Owner’s Insurance Policy as soon as construction on the home actually starts. Ascertain that your builder – and any subcontractors they employ – have their own insurance in case someone gets injured on the job.
There will always be unforeseen expenses, for which you will need extra cash on hand. Always try to budget about 5% of the cost of the home for unexpected costs.
By using due diligence and hiring the most experienced and skilled professionals in each discipline, you’ll make the process as stress-free as possible!