Cost Estimation: Know What You Can Afford

“Suppose one of you wants to build a tower.  Will he not first sit down and estimate the cost to see if he has enough money to complete it?”  -Ancient Proverb

It’s no secret that we live in a society which revolves around instant gratification.  Gone are the days when we used to repair things multiple times before deciding that they were no longer usable.  Instead, we now find ourselves saying, “What the heck, I’ll just trade up!”  However, with 2007’s housing market collapse, the importance of spending within our means has become extremely clear.

Therefore, if you’re considering building a custom home or you’re thinking about diving head-first into a full remodel, prudence in regards to your cost estimation needs to be at the forefront of your mind.  While this may seem like a given, truth-be-told that many people often fail to have a concrete grasp of what they can or want to spend.

Plain and simple, determining what you can afford before beginning the design/build process is crucial.  If financing is needed, speaking with an experienced mortgage lender is important so that they can help you determine your limits.  While somewhat time consuming—you will need to produce documents stating your income, assets, expenses, taxes, credit history, insurance, maintenance, and utilities—the peace of mind you will receive in the end will be well worth it.

With this, it’s also worth remembering that, while a good builder or general contractor will always do their part in making sure that their work can be done within your means, unforeseen situations may still arise during the actual construction process.  To combat this, when creating your budget it’s smart to shoot for a price that is about 5-7% below what you can comfortably afford.  That way, if issues arise or you simply decide that you’d like an upgrade on your flooring, changes can be made without too much worry.

Without this due diligence, those who begin to design without first assessing the cost, often build to suit their dreams, while later realizing that they have gone way above what is feasible.  Therefore, to avoid the panic, frustration, and anger which accompany an unexpected price tag, it’s also important for homeowners to realistically determine what they can afford.  Once a target number has been reached, a design process can begin which focuses on creating the home you’ve always imagined.