The Pre-Design Phase / Design Research

Creating a Preliminary Budget

"A budget tells us what we can't afford, but it doesn't keep us from buying it." – William Feather

Overview

Developing a preliminary budget and schedule is an essential step in the early stages of the home building process, especially if you've been spending all of your time collecting inspiration and dreaming about your new kitchen. A preliminary budget helps you set realistic expectations, allocate resources, and make informed decisions throughout the project. Having a clear budget and schedule in place also facilitates communication with your project team and ensures everyone is on the same page.

Creating a project budget and construction schedule at this stage helps you lay the groundwork for a successful home project, even if all of the details aren't set in stone and will almost definitely change. It allows you to make informed decisions, set realistic expectations, and better manage your resources. Here, we'll explore the process of establishing a preliminary project budget and construction schedule.

Create a Preliminary Budget

To create a preliminary budget, start by estimating the cost of the various components of your home project. At this stage, the goal is to get a general idea of what you can afford and where you may need to prioritize or make adjustments. You can also get started with our tools to help you figure out your budget with an [EcoHome project](/start and what you can build with it. We'll dive into financing in another guide, but for the time being, consider the following aspects:

  • Land acquisition cost: Determine the cost of the land, including any related expenses such as surveys, soil tests, and title fees.
  • Design fees: Estimate the fees for architects, engineers, or other design professionals involved in your project.
  • Construction costs: Calculate the approximate cost of materials, labor, and equipment required for the construction of your home.
  • Permit and inspection fees: Research your local permitting requirements and fees to include them in your budget.
  • Financing costs: Account for loan origination fees, interest, and other financing-related expenses.
  • Contingency fund: Include a contingency fund of 10-20% of the total construction cost to cover unforeseen expenses.

Develop a Preliminary Construction Schedule

A preliminary construction schedule provides a high-level overview of the project's timeline, allowing you to anticipate potential challenges and manage resources more effectively. To create a preliminary schedule, consider the following factors:

  • Design phase: Estimate the duration of the design phase, including concept development, schematic design, design development, and final design.
  • Permitting process: Research the permitting process in your local jurisdiction and estimate the time required to obtain necessary permits.
  • Financing timeline: Consider the time it may take to secure financing for your project, including loan application, approval, and disbursement.
  • Material procurement: Estimate lead times for materials and include them in your schedule to ensure they arrive when needed.
  • Construction phase: Break down the construction phase into smaller milestones, such as site preparation, foundation work, framing, roofing, and interior finishes. Allocate a timeframe for each milestone based on the complexity of the tasks involved.
  • Allowance for delays: Be realistic and include buffers in your schedule to account for unexpected delays, such as weather events, material shortages, or contractor availability.

Once you have established a preliminary budget and construction schedule, use them as a basis for refining your project scope and making necessary adjustments. As you progress through the design and construction process, revisit and revise these preliminary estimates to ensure they remain accurate and up-to-date.

Pre-design Financing

Securing adequate financing and identifying cost-saving measures are essential components of a successful home project. In this section, we'll discuss strategies for finding financing options and implementing cost-saving measures to make your dream home more affordable.

Financing a home project can be a complex process, but with the right research and planning, you can find the best option for your needs. Consider the following financing options:

Construction loans: These short-term loans, usually lasting 12-18 months, are designed specifically for financing the construction of a new home. Once the construction is complete, the loan is typically converted to a long-term mortgage. Construction loans typically have higher interest rates and more stringent approval requirements than traditional mortgages, but they're designed specifically for construction projects and allow interest-only payments during the construction phase.

Traditional mortgages: If you already own the land, you may be able to use a traditional mortgage to finance the construction of your home. Talk to your lender about the specific requirements and limitations of this option.

Home equity loans or lines of credit: If you have sufficient equity in your current home, you can use a home equity loan or line of credit to finance your home project. A home equity loan provides a lump sum of money that is paid back over a fixed term, typically at a fixed interest rate, while a home equity line of credit works more like a credit card, where you can borrow up to a certain limit, repay the balance, and then borrow again.

When researching financing options, be sure to compare interest rates, fees, and terms from multiple lenders to find the best deal for your situation. If you'd like more information, please see our guide on Financing, or talk to your local bank or mortgage lender. Financial advice from a professional, such as a financial advisor, accountant, or mortgage broker, can be invaluable in making these significant financial decisions. As every individual's financial situation is unique, consulting a professional could provide personalized advice that's appropriate for your circumstances.