How to Calculate Construction Costs of Building a New Home

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If you want to build your new home, even if you hire out the project to a general contractor, there is one key responsibility you should not pass to a contractor.  You should take the responsibility to calculate construction costs of building a new home.

Since we are likely discussing the largest singular financial transaction you will have, your hands on the purse strings cannot be overstated or overlooked.  If you do not make these calculations and conclude with a total cost, even an estimate, how will you know if and when you exceed your budget?

What should be included in the calculation?

It is more easily said than done.  The short answer is: everything.  The long answer is: be reasonable because details like how many electric light and outlet fixtures you should have is likely to change as the design matures, but these minute details are not usually budget breakers.

There is an easy formula with detailed elements that will confuse matters if they are not accounted for completely and accurately, such as the number and type of doors and windows.  What follows will describe some of the details:  Construction costs of building a new home equals the cost of the property, plus the building cost per square footage in your locale times the square footage of your home, plus building fees.  Built into the square footage cost should be the materials, labor and contractor profit margin.

If you are already paying on a loan for the land on which you will build your home, now is a good time to consult with the lender about the eventual conversion of that loan to a home mortgage.

Once you have completed the home plans, a building permit with associated fees will be necessary to obtain before construction begins.

The rest of the budget addresses the construction project and materials and labor involved.  Fortunately, there are several optional websites accessible to the laymen homeowner to assist in the collection of costs involved to estimate a total building cost.  It is a good idea to take advantage of one of these online calculators; they will offer suggestions for home design details you may otherwise overlook:

Foundation variations are more complicated than just a slab or a basement foundation.  If a slab, do you want a crawl space?  If a basement, is it full or partial?  Do you want a walkout?  Where and how many windows in the basement walls?  Will there be living space beneath a garage?  How many cars of what size will the garage accommodate?

If the front door, or other exterior doors into the house are raised from grade, how high and wide are the staircases and landings, and of what material(s)?

What is the desired roof pitch?  This will affect not just exterior aesthetics, but interior ceilings.  Flat or cathedral, and what pitch and height?  Single, double, or more floors?  How many staircases?   Roof material?  Exterior sheathing type?

The interior questions multiply

How many full (tub, shower, sinks and toilet), three-quarter (shower, sink and toilet) and half (sink and toilet) bathrooms?  How many custom, master bath suites?  Kitchen size, cabinetry, appliances?  Multiple kitchens?  How many fireplaces?  Wood-burning or gas?  Fixtures?  Flooring?  How many bedrooms?  Living and separate family room?  Den?  Other specialty rooms like a home theater? Standard or energy efficient appliances.

You should expect that some home features will be of greater expense than others.  Tile floors, for example, are more expensive than linoleum, and some tiles are more expensive than others.  There are various grades of hardwood floors.

The two most expensive room types will be the kitchen and bathrooms.  Size and complexity of these rooms will vary the expense.  Since we spend much of our time in these rooms, outfitting them to fit our preferred lifestyle is essential.  If you like to cook, minimizing the space and features of your kitchen will be a constant disappointment.

You can also figure that of two homes with the same square footage, a two-story home will have less building cost because plumbing, electrical and roofing are more compact than a ranch-style home.  Also, if your home has a basement, while a higher ceiling, such as a 9-foot instead of 8-foot basement room ceilings will significantly reduce the cave-like feeling, expect to add expense depending on typical building costs in your locale.

Final thought

Estimating the construction costs of building a new home can be a daunting task, but just as with calculating the cost of a home improvement project, just remember to have a complete design and scope of the project, consult with professionals and calculate your costs as carefully as possible to avoid serious budget-busting expenses.

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