From Tom's desktop...BUDGET-BASED HOME DESIGNING is an excellent process to
follow
in order to match your new home design to what you can afford.
Of
course, the first step is to go to your lender
to become pre-qualified for
your construction loan.
REVIEW THE FINANCIAL CALCULATORS AT HSH ASSOCIATES
http://www.hsh.com/calculators.html
Remember:
getting prequalified is NOT the same
as completing a loan application.
Not
only is a loan prequalification FREE, but getting prequalified
is very informal,
does NOT REQUIRE any drawings and specifications,
and the lender should be
able to let you know approximately
how much you'll be able to borrow BASED
ON YOUR ASSETS & LIABILITIES.
While at the lenders office, pickup
a loan application packet.
Pay VERY CLOSE ATTENTION to the application
checklist for a
residential loan application, which youll follow later.
Gather your application documents but DO NOT APPLY for a construction
loan
at this time...ONLY PRE-QUALIFY for a construction loan.
This will indicate
what you can afford at this time.
Keep the "description of materials"
and "construction cost breakdown"
forms provided by the lender for
reference during the design process.
The "description of materials"
and "construction cost breakdown" forms
will come in handy as you
consider different options for your home design.
These forms are NOT necessary
to pre-qualify for a loan.
Use these forms early in the conceptual phase
of the home design process
so you can analyze costs and consider your drawings
and specifications
from the outset of design development. These forms will
eventually be
added to you application once you're ready to apply for the construction
loan.
An ADVANTAGE to using these forms early in the home design process
is
to remain within the application format required by the bank,
as well as keeping
others within this format, too.
You'll find it very efficient to be in conformance
with the application
documents right from the beginning of the design/build
process
so you won't experience any inconvenience later translating FROM how
all
the contractors and suppliers organize their own versions
of the "description
of materials" and "construction cost breakdown" TO
how the lender
requires you to present the very same information on their forms.
Another
ADVANTAGE using these forms is to know from "Day One"
of the design
process that the products and labor to create your home style
is within the
range of what you can afford to build.
Be certain budgeting begins with
"pre-qualification" for a loan.
Whether you work with an architect
or contractor, or act as an owner/builder,
you'll want assurances from the
architect and contractor that the
materials specified and scope of work described
in the
conceptual drawings is consistent with your pre-qualified budget amount.
REVIEW
THE CONSUMER TIPS IN THE SCAM ALERT
http://ownerbuilder.com/scamalert.shtml
A
BUDGET is a financial plan for your entire Design/Build process.
It is the
dollar equivalent for all the work it takes
to design and build your new home.
You are NOT expected to create
this document accurately at the outset of your
experience
so it's best to begin with very general estimates,
and then refine
your financial plan as time goes by.
TRY USING THE CALCULATOR AT BUILDING-COST.NET
http://www.building-cost.net/
The
primary purpose of preparing a BUDGET
is to understand and control costs; however,
it's also a means
to keep all conversations focused on the same topics
and
moving forward together using the bank's documentation.
Beginning with
the estimates, one is able to guesstimate
the total dollar amount for the style
and size of a home on a particular lot.
YOULL ALSO WANT TO CONSIDER
SITE DEVELOPMENT COSTS
http://www.ownerbuilder.com/buildable.shtml
At
the very least a homeowner should be able to consider
if the project is feasible
once estimates are made.
The total dollar amount can be broken into two
categories:
hard costs and soft costs. Hard costs include labor and
material
to build the house. Soft costs include everything else.
The following budget
provided below outlines products and services
that one utilizes during the
entire design/build process.
The budget estimate for hard and soft costs
is a departure point
for considering the scope of drawings and specifications.
This is why you need to keep the "description of materials"
and
"construction cost breakdown" in front of you at all times:
so you
consistently follow a format that sequentially
follows the phases of work to
be performed.
TRY GET-A-QUOTE FOR ESTIMATING COSTS
http://www.get-a-quote.net/
These
budgetary considerations BEGIN early in the schema phase
of the design/build
process. Consider the initial study
of costs as an exercise in project feasibility.
The initial study of costs is also a means to open dialogue
with your designer,
trade contractors and suppliers
in order to more deeply examine how costs
might
be reduced or quality of work improved.
Based on your projection of costs,
the homeowner should be able
to weigh and consider design/build options. With
estimates prepared,
attention can be given to the budget review process:
1-identify
priorities,
2-recognize trade-offs,
3-do cost/benefit analysis,
4-revise
cost estimate.
You should realize that, at this point in the budgeting process,
this
is a very VOLATILE estimate. For instance, if you choose
the "Sub-Zero"
brand refrigerator for your appliance package
(and if comparable products are
used), then you might as well
accept that once you complete your estimate,
you may hold
the price tag on a very high-end, luxury house. If you purchase
the
"Maytag" brand refrigerator for your appliance package
(and remain
with comparable products), then your estimate will
result in a medium-priced,
custom house.
Still another resource provided by Craftsman Books is
the
"free trial estimator" download of their estimating program.
You
may download a cost book and estimating
program for a free 30-day trial offer.
CLICK
ON CRAFTSMANS TRY IT / BUY IT BUTTON
http://www.costbook.com/
There
is a cost range from economy, to modest, to custom, to luxury,
which CORRELATES
with the products and materials you choose
to install in your home. Match product/labor
choices with the
price category in which you can afford to build.
The
following percentage estimate for a construction budget
is in the "ball
park." It simply is a beginning point for determining
if the amount you
have to spend is even close
to the house you want to build.
PRELIMINARY
BUDGET ESTIMATE BY PERCENTAGE OF TOTAL COSTS
All preliminary budget estimates
will include material and labor
to complete both rough and finish installation.
The
following budget list represents cost categories,
both hard and soft costs,
to which you must assign
preliminary dollar amounts for the work to be accomplished.
HARD
COSTS
3% Excavation & Site Prep
6% Foundation & Flat Work
18%
Framing Materials & Labor
4% Roofing and Storm water
9% Exterior Trim
Package
5% Plumbing Rough/Finish
5% HVAC Rough/Finish
5% Electrical Rough/Finish
4%
Septic or Sewer Install
4% Water Connect
2% Insulation
5% Drywall
3%
Paint Interior/Exterior
10% Interior Trim Package
6% Floor Coverings
4%
Appliances
2% Landscaping
5-10% Overhead
100% of Budget for Hard Costs
of Home Building
Youll need to burden these hard costs
for home building
with the soft costs required to accomplish the work.
This
means you need to multiply the total hard costs
by the percentage of soft costs.
SOFT
COSTS
4-12% Architects/Designers Fee
5-10% Building Permit Fee
10-20%
Builders Profit
(Varies) Sales Tax by State
(Varies) Interest
on Construction Loan
20-45+% of Budget for Soft Costs of Home Building
So,
if the Hard Costs for your new home total $150,000.00,
then youll need
to multiply this amount by at least an additional
$52,500.00 to allow for Soft
Costs of home building,
for a total of $202,500.00.
This does not include
cost of land!
And
dont forget to consider the lenders closing
costs!
Getting started on a Budget Estimate can be exasperating with no
formal
training in the business of residential
architecture and construction.
You
can succeed by taking your time, allowing yourself the freedom
to PROGRESSIVELY
APPROXIMATE the total scope of work.
At the outset...you don't know where
you're going for sure;
but, over time, you eventually get to the point where
you
understand what it takes to get your job completed.
You succeed by collaborating
with architects, designers, builders,
trade contractors, manufacturers and
suppliers to discover
costs of completing your scope of work.
I hope
this explanation is helpful.
Utilize the lenders "description
of materials" and
"construction cost breakdown" to guide your
collaboration.
Insist that all designers, trade contractors and suppliers
also
utilize the same format so theres one, standard
template to which all
will contribute their cost estimates and ideas.
The purpose of this explanation
is to help you create a fiscal plan of action
following a process of BUDGET-BASED
HOME DESIGNING.
LISTEN TO JULIE MUELLER DISCUSS "CONSTRUCTION BUDGET"
http://www.downhomeradio.com/#construction_budget
Best
Regards,
Tom Landis
Owner Builder News
To Comment or Unsubscribe,
Reply to this Message.