What a great topic to talk about.  As a home builder in the Cape Fear region we have a lot of people who ask us this question when thinking about where to spend their retirement or what their next housing investment should be.  The good and bad part about this question is that there’s no one answer fits all.

 

I love being able to help people figure out what their budget is and what their luxury is.  The trick is to ask the right questions to both yourself and your home builder. 

Step 1 – Define your budget.

Becoming house poor, no matter how nice the house is, is never worth it.  When looking into building a house, one of the first thing you should do is figure out what you can reasonably afford.  A good way to do that would be to contact your bank’s loan officer and let him give you an idea of what price home you could qualify for…. Then take whatever high number he gives you and don’t go near it.   

 

A good loan officer should help you understand that while you might qualify for a higher amount, realistically the best way to keep yourself financially healthy will be coming in well under that max qualified amount. You want to make sure that by building a new house the payments and down payment will not cost you in quality of life.  Use https://www.mortgagecalculator.org/ to help you get an idea of what you can afford based on the monthly payments and down payment.

 

My suggestion to people is making sure your payment is under 30% of your after-tax take-home pay.  From my experience, going over that 30% mark tends to really hurt your monthly budget.

 

When it comes to dealing with your home builder, set a target for yourself to come in under the max amount your willing to spend for your new home.  My rule of thumb percentage is about 10-12% under your total budget.  This of course is dependent on the type of contract you have with your builder.  But if you can be reasonably assured that the cost of your new home will not go over that amount then you’ll be in good shape to make you get everything you need to make sure your new home will be luxurious to you when it’s finished.

 

If you’re able to shoot for 10-12% under your desired home cost, then that will allow you to make upgrades or changes during construction.  When I’m working with a client to build their new home I’m always trying to make as many decisions as I can before we sign the contract, obtain financing and begin.  Even though I try my best to get everything covered before we begin there’s never been a project that hasn’t requested a change order for an upgrade of some sort.  It’s really impossible to cover every detail of a house before we begin and over the course of several months while the house is being built, clients will change their minds on initial decisions and or do more research into products that come in over the allowances.

 

Hopefully you don’t use all 10-12% during the course of your build but it will help you get everything you want to make sure that your home is exactly what you want by the end of the build.

 

Step 2 – Define your luxury.

Have you ever been told you have a champagne taste with a beer budget?  Well if you have don’t build a house without doing a reality check.  Getting a luxury home within your budget is most likely doable but it will require prioritization of what luxury means to you.  Most people don’t build a home without having some change in their mind from their current living situation.  So ask yourself what you think is most important to have in your next home.   

 

For a growing family we understand that space might be the biggest priority.  The added hardwood in the bedrooms, upgraded granite and appliance package can be left behind if it means the living-room can be made larger or add an extra bedroom.

 

A retiring couple, the purchasers of the “forever home,” might prefer nicer finishes, larger covered porches and higher efficiency products and be happy to sacrifice having the space they had before in order to obtain these things. 

 

Most likely you find yourself in the middle somewhere.  And whether your budget is $200k or $2m you will still have to ask yourself the same questions.

 

Step 3 – Ask your builder.

Once you find the builder you want to use, pick his/her brain.  They have experience and have most likely seen people in similar situations as you build a home and can help with some of the decisions.  They should want you to be happy once it’s all over so tell the builder what your priorities are in your new home and what your budget is.  Let them know that you have a little bit of room to go above that budget if the builder comes across something he/she thinks is in line with what you want.  A good builder will reach out to you with ideas on how to make the home a luxury to you and not just try to upsell to you.

 

In conclusion, to build a luxury home on a budget takes a bit of work but is obtainable.  It’s more about setting expectations and prioritizing goals than getting a killer deal from a builder.  A good builder will work with you and suggest affordable ways to make your luxury home a reality and as the client your will make sure you’re financially ready to take on building and owning your new home.

 

 If you’re looking for home builders to construct your dream home, contact Langbeen Builders in Southport, NC. They’ll work closely with you to create a house that’s perfect for your family. To schedule a consultation, call (910) 547-4205, or visit their website to view a gallery of their work.