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  • Writer's pictureCaitlin Kelley

How Much Does Building Your Dream Home Cost?

Do you see yourself living in the mountains, by the ocean, or in the desert? Have you ever imagined your perfect home? A place that meets all your desires and fits perfectly with your lifestyle? If you want to bring your vision to life and create the ideal home, it's essential to consider one critical aspect: the cost of construction. What exactly are the expenses involved in building your dream home?

Sunset view over the Pacific Ocean from a contemporary coastal dream home
Dream Home by the Ocean

An experienced architect who understands the many parts and pieces that affect the cost of your custom home can assist you in creating and managing your budget by providing guidance and awareness of these dynamics.

First, to determine your budget, separate the price of building your dream home into hard and soft costs. Hard costs are associated with the physical construction of your home, whereas soft costs are additional expenses you'll need to include in your budget to build.

Identify hard construction costs

Hard construction costs refer to materials, labor, and other expenses linked to the physical building process and fluctuate with the market depending on the economic conditions. Initially, using the area volume method, in other words, a cost per square foot calculation of current market pricing, gives you an estimate of how much it will cost for you to build your dream home. This number can be a sobering reality check, but it provides a realistic scenario!

The price of wood and concrete will vary with the commodities market, as do large items like windows, roofing, insulation, drywall, and siding. However, you have more control over your finish selections as the homeowner. When choosing materials for your design, it's important to consider the look and feel you're going for. You can achieve the aesthetic you want without spending more than necessary. For example, selecting bathroom tiles that cost $4 per square foot instead of $7 can make a difference in your overall construction costs yet still give you the look and feel you are after. Though the price difference may seem insignificant, it can add up eventually.

Contemporary appliances and clean white cabinets in a dream home kitchen
Dream Home Kitchen

When choosing energy-efficient systems like heating, cooling, and appliances, consider their proficiency. You typically have two options: pay a higher price upfront for a more efficient product and lower energy costs, or spend less on a system that isn't as competent and pay higher utility bills. Since most mechanical systems are now Energy Star® rated, compare products to determine the best fit for your budget. Investing in a metal roof that can last up to 50 years or more could make more sense, even if it means paying more now than replacing an asphalt shingle roof in 5 to 15 years to save money. Considering the overall costs of your choices can ultimately save you money over time.

The cost of the site work is critical in determining your project's overall budget. If the soil is unsuitable for the type of project you have planned, it may require alternate strategies to mitigate its conditions. To have a breathtaking ocean view from your home, you may need to remediate the place where the house will sit. For my clients, Karen and Jim, drilling (14) 40-foot-deep caissons into the cliff to build the foundation of their dream home overlooking the Pacific Ocean is a significant part of the construction costs. Knowing the extent of site work involved in creating your desired home avoids surprises and helps you plan your budget accordingly.

When you have an accurate estimate of the price for construction, you'll feel confident about the cost of building your new home.

Determine soft costs for building your dream home

In addition to the hard costs related to the physical construction of your custom home, you'll need to consider the soft costs. A custom home requires a lot of forethought and planning. Along with the architect's fees, there are costs associated with surveying, civil engineering, structural engineering, soil engineering, and energy calculations. In some cases, there are additional consultants, such as Mechanical, Electrical & Plumbing, lighting, landscape architects, and interior designers. There may be costs associated with obtaining approvals from the architectural review boards and property owners' associations if the project is in a planned community. Jurisdictional approvals may include not only the actual building permit but a coastal development permit, land use permit, planning commission, or city council approvals and other associated processes for permission to build your home on your property. These expenses are typically a calculated percentage of the total construction costs and can range between 20% and 30% or more, depending on your locality.

When building your dream home, your architect will help you determine the cost by researching the site location and jurisdictional requirements. The architect will create a budget based on your available funds, which will help decide the size and location of your home on the site. By calculating these building costs during the design process, you can make informed decisions that will keep you within your budget.

Beautiful ocean view from the living room of a dream home
Dream Home Ocean View

The budget gets more refined as you move through the phases of the architectural process. During the design development phase, material selections provide additional information defining, for example, costs for the kitchen, bathrooms, windows, and flooring, so the contractor can prepare preliminary pricing. Getting an initial cost estimate will assist you in making final choices and modifications should the costs be out of your reach. Choosing a contractor early in the process saves you time and money. They often have ideas for less expensive construction methods resulting in the same outcome.

Comparing the initial pricing with your budget helps you decide if you need to make modifications. Making changes during the design phase is easier than making changes during construction, which can increase your building costs.

Obtain funding for your dream home

Establishing a relationship with a construction loan officer at a bank should occur while working on your design with your architect. You can approach the bank for construction funding with your preliminary plans and pricing. The bank will evaluate and appraise your project to determine if it is a good investment for them. They will establish your loan amount based on the construction costs presented by the contractor and consider the money you've spent upfront on soft costs, including land and any improvements, as equity. Additionally, the bank will vet the contractor to ensure they are reputable and have connections within the community. This initial meeting with the bank will set the lending process in motion as you provide them with the necessary documentation to qualify you and your project. Once the bank has a copy of the permit set of plans and the contractor's final construction pricing and schedule, they will approve the construction loan. Securing funding early ensures you can start once you have your permit. Include a 10% contingency in your budget for any unforeseen costs or changes during construction. To determine the best terms and rates for construction loans, speak with several banking establishments.

Understand the construction funding process

Applying and qualifying for a construction loan is like a line of credit. The bank does not release your loan in one lump sum but at specific construction phases. The contractor submits a draw request to the owner and the bank upon completing a portion of the work according to the schedule. After submitting a draw request, the bank will send their construction inspector to the project to ensure that the requested amount matches the completed work. Only then will the funds be released. Draw requests for material deposits are also part of the funding process.

Once the building of your home commences, the architect's role becomes that of the construction administrator, overseeing the contractor's work. As an expert, the architect will ensure that construction progresses as planned with good-quality materials and labor. As questions arise in the field, the architect is on hand to answer them. The bank often requires the architect to sign off on the draw requests before paying the contractor. Having an architect's oversight on the spending for your custom home assures you that the costs for building your new home follow your planned budget.

Dream Home perched on a coastal cliff
Coastal Dream Home

Discover the cost of building a dream home

When planning to build your dream home, consider these aspects that affect your overall costs. Carefully assess the hard costs, such as materials, labor, and site work, as well as the soft costs, including planning, design, and project management. Approach banks early with preliminary drawings and price estimates while demonstrating financial stability. Choose reliable contractors. Choose an architect who oversees the project during construction to ensure it stays on schedule and meets quality standards. In conclusion, selecting a competent team for your custom home project is an investment in your home's value and success.

If you are ready to collaborate with an expert architect to successfully build your dream home within your budget, call me and let's start the conversation:

Tel: 858-344-2404, or email:

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