How to Budget for a House Build: Tips for Success

Master the art of budgeting for your house construction with expert tips. Ensure your project stays on track financially.

Real Estate
October 21, 2023
How to Budget for a House Build: Tips for Success

If you’re reading this, you’re probably well-versed in budgeting. Maybe you have created a foolproof budget –– to afford a vacation, a luxury purchase, or your first home. Regardless of why you might have employed a budget, you are likely familiar with the benefits of a budget and the value of strategic saving. We’re willing to venture, however, that when it comes to a home-building budget, you’re treading in new territory. 

From creating a financial outline to keeping the construction project on track, we’ve got you covered. Read on to learn how to budget for a house build like a pro. 

The Importance of a Solid Budget 

Before we explore how to budget for a house build, let’s examine why having a solid budget is so crucial –– whether it’s for a routine expense or a once-in-a-lifetime venture like building a house. Establishing a solid budget isn’t only about numbers. It’s about identifying your goal(s), pinpointing exactly what it will take to get there, and then adhering to your plan. Here are some advantages of having a solid budget for your house build. 

Greater Financial Clarity

There’s a saying that, “You can’t manage what you can’t measure.” And while this is generally applied to business practices, it’s equally potent in budgeting. A detailed budget paints a crystal clear picture of your financial situation, allowing you to confront counterproductive spending habits head-on and create flexibility where you thought there was none. Sure, putting your finances under a microscope can be uncomfortable at first, but once you pull off the Band-Aid, you’ll find that understanding your circumstances can be the key to maintaining (or regaining) control. In your home build, a budget provides invaluable financial clarity on total construction cost. 

Avoiding Overspending

Without a budget at the grocery store, you may find yourself quickly overspending on snacks, candy, or a deal at the deli that was just too good to pass up. Without a home building budget, you may find yourself overspending all the same –– just with sky-high stakes by comparison. On average, building a home from scratch is the cheaper alternative to buying an existing property.1 But left unchecked, construction costs like materials, labor, drawings, and even paperwork can quickly erode away at your savings. Set a clear budget from the outset to ensure you’re getting the better deal on your home construction after all. 

Setting Priorities

A budget can help turn your custom home dreams into reality –– but within reason. And regardless of how many takeout trips or cups of coffee you eliminate from your profits and losses sheet, you may still not be able to afford every single amenity you always envisioned your dream home would have. But by prioritizing the features you simply can’t live without, you can get as close to your vision as possible. A budget will help you narrow down your home’s must-have features and elements, ensuring that the most important aspects of your home build are financed. Then, after home construction is complete and the last box is unpacked, you can start thinking about your additions for phase two. 

Securing Financing 

At the end of the day, a home building budget is not only beneficial. It’s often required. So, as you craft your budget, consider how to finance building a house.

To secure a construction loan from lenders and financial institutions, you’ll likely have to provide a well-organized budget with your application –– detailing exactly how your funds will be deployed if your loan is approved.2 It will take some time to concoct a comprehensive construction budget, and there may be unexpected costs. But as we’ve made clear so far, this application requirement offers more than enough benefits to make it worth your while.  

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Creating a Detailed Construction Budget

So, a home building budget helps set clear priorities, can give you a clear understanding of your financial situation, and is often required to get your construction loan funded –– plenty of reasons why you should adopt a detail-oriented approach to this process. Here’s a step-by-step look at how to craft a precise home building budget. 

Estimate Total Construction Costs

Your first step in establishing a home building budget should be to estimate the total cost of construction itself. How much does it cost to build a house, exactly? The total cost will include material costs, labor costs, permits, and any necessary professional services –– like architectural and engineering fees –– and should be as comprehensive as possible. Know friends or family who have been through this process? Leverage their experiences to establish a ballpark estimate, even if only to get your budgetary gears turning. 

Consult Professionals

After doing your best guesstimating based on research and findings from people in similar situations (or just online), you’ll want to solidify your construction costs by obtaining estimates from professionals. Familiarize architects, contracts, and real estate professionals with your situation, leaning on their collective expertise to ensure your budget is as detailed (and accurate) as possible. And while it may extend your timeline, it is in your best interest to get second opinions wherever possible. This will not only help you ensure precision in your estimate but will ensure you get the best price available. 

Don’t Forget About Land Costs

Land is, arguably, the most important ingredient in the home building cocktail. It makes sense, then, that so many aspiring homebuilders forget this detail when establishing their home building budgets. If you haven't already purchased the land, be absolutely sure to include its cost in your budget. Without it, your budget could be off by as much as $150,000.3

Account for Additional Expenses

With your construction and land costs accounted for with figures backed up by experts, all your bases should be covered –– right? Well, not exactly. Building a home is a major undertaking with lots of moving parts, and unexpected costs tend to pop up as a result. When assembling your home building budget, be sure to consider things like interior finishes, legal fees, material price hikes, and dreaded change orders in addition to the building cost and labor cost. Preparing for these wild-card expenses will reduce stress and allow you to deftly navigate toward a budget-friendly solution. 

Build Up Your Contingency Fund

Anticipating these additional expenses is one thing. Being prepared for them is a different animal altogether. As a backup plan, it’s wise to establish a contingency fund, just as you would establish an emergency fund for your day-to-day budget. No home building budget is complete without this contingency fund –– usually between 5 and 10 percent of the total cost –– as this will help limit any money-related speed bumps on the way to building your dream home.4

Monitoring and Adjusting Your Budget

By drafting a detailed home building budget for your new home construction, you’ve proven that your dreams are within reach and established a series of strategies to reach them. But although this task is complete, your work is far from over –– and it’s essential that you consistently monitor and adjust your budget throughout the construction process. 

Conduct Regular Check-Ins

New construction can take a few months, or it can take a year. Regardless of the duration of your project, be sure to establish progress milestones and audit your budget along the way. This will help you identify minor issues before they become major ones, implementing solutions in real time rather than cleaning up a big-time mess down the road. Or, even better, it will give you the peace of mind that everything is running smoothly. 

Establish Clear Lines of Communication

As we mentioned earlier, construction projects involve many, many moving parts, and it’s easy for communication to be drowned out by the sounds of hammers, drills, and circular saws. From the onset of your home building journey, be sure to establish clear communication lines with all parties involved, ensuring contractors and decision-makers know how to reach you to keep progress moving (and costs on par with your budget.)  

Reevaluate and Adjust as Needed 

The cost of building materials fluctuates, weather changes occur, and people get sick –– despite what their name might suggest, unexpected circumstances should most definitely be expected during the construction project. When these roadblocks emerge, do your best to pivot gracefully and make adjustments as needed. By doing your best to remain in control of the situation, you can stay mindful of your budget (and keep your head in the process.)  

Looking for Flexibility in Your Budget? Try Truehold’s Sale-Leaseback

In many ways, a home building budget is like a superpower: it allows you to unlock something within yourself that was there all along to accomplish something great. But despite the power of budgeting, there’s always a chance that your dream home will remain out of reach if you rely on your existing resources alone. In this event, you can explore personal loans, home equity loans, or HELOCs –– taking on oodles of interest to accomplish your dream –– or you can look around at your own four walls. 

With Truehold’s sale-leaseback, you can tap into your existing home equity without a loan (and without the interest), leveraging your property value to fund the construction process. When you sell your home to Truehold, you access your home equity as you would during a traditional sale, but you maintain the ability to rent your home for an extended period of time. In other words: you use your existing home’s equity to build your new home, paying rent and enjoying the comfort of a familiar space until your new home is ready. No piles of loan application paperwork and no decades-long repayment process, just your home equity working for you. You’ll also avoid the hassles of listing and showing your home through a traditional sale before you move. 

Depending on your available home equity and the value of your home, Truehold’s sale-leaseback may create some room in your home building budget –– or replace your budget altogether. Find out by contacting one of our trusted advisors, and get a cash offer on your home within 48 hours.  


1. Rocket Mortgage. How Much Does It Cost to Build a House? 

2. Rocket Mortgage. Construction Loans: Everything You Need to Know. 

3. Bankrate. Is it cheaper to build a house or buy one? 

4. Buildertrend. Contingencies in residential construction: What builders need to know. 

Nicolas Cepeda headshot
Written by
Nicolas Cepeda
Financial Analyst at Truehold - A Specialist in Real Estate Finance
Nicolas Cepeda specializes in financial analysis and strategic portfolio management, with a keen focus on innovative residential real estate solutions. He leverages this expertise to cover pertinent topics in the real estate and financial sectors.
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Truehold's blog is committed to delivering timely and pertinent insights in real estate and finance, purely for educational and informational purposes. Crafted by experts, our content is thoroughly reviewed to guarantee its accuracy and dependability. Although designed to enlighten and engage, our articles are not intended as financial advice and should not be the sole basis for financial decisions. Our stringent editorial practices ensure the integrity of our content, empowering our readers with valuable knowledge.

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