8 Easy Ways to Stay on Budget when Building a House

8 Easy Ways to Stay on Budget when Building a House

This Guide

This guide will take you step-by-step through the complex process of learning what goes into designing and building your dream home, the impact that the lot will have on the design, understanding primary building cost, and making sure that you and your builder are on the same page so that your home construction is on time and on budget.

Your Wants, Needs, No-Ways

As you begin thinking about what your newly-built home will look like, map out what you can’t live without, what you wish it included, and what you definitely don’t want. This will help you prioritize choices when creating your house building budget. Consider some of these questions to get you started:

  • Do you want to build a house in a development or community?
  • Do you need a flat yard or are hills acceptable?
  • How much room do you need around your home?
  • What should your home floor plan look like?
  • What kind of outside living spaces do you want?
  • How big should the garage be?
  • How many bedrooms and bathrooms do you need?
  • Are there any specific materials or features you’d like to incorporate?

When creating your budget, try to focus on the structural necessities (size, stories, etc.) of your home design first. Whatever is left in your budget can be put toward design features and upgrades like a gourmet kitchen with an island or a peaceful sunroom addition.


9. Add Energy-Efficient Home Features For Rebates And Taxes

Everyone seems to be going green when building and there’s a cost-saving reason for that. Using energy-efficient materials, including better insulation and high-efficiency windows, may cost more upfront, but can ultimately save money for homeowners over the years. Consider solar or wind energy as a power source, but check to make sure that these are available in your area and right for your particular piece of land.

You might also be able to qualify for rebates and tax breaks for building certain energy-efficient elements into your home. Check with EnergyStar.gov to search for local, state, and federal rebates for your energy projects.

Wha Does House Rich But Cash Poor Mean?

When you are "house rich but cash poor," it means you have more equity in your home than cash in your bank accounts. In these cases, most of your money is tied up in your home versus accessible liquid assets. If you need to access cash quickly, you may not be able to if all of your money was invested in your home. However, if you have a lot of home equity, you can access it with an equity line of credit or home equity loan.

Avoid the May as Well Quicksand

“As long as we’re spending this much on the kitchen, we may as well upgrade the countertops,” you may be thinking during your build. Although a couple of hundred dollars here and there may not seem like much, these items will quickly add up and spell the collapse of your budget.

A detailed plan that prices out even the smallest details in advance curtails this type of budget-blowing scope creep.

2. Try A Tiny Home

There’s a reason tiny houses are increasing in popularity: they cost less to build and can be built on wheels for people who may wish to move in the future. You don’t necessarily need to buy a tiny home to get the cost benefits of a smaller home.

Many of your materials and labor is going to be priced per square foot. Build a 2,000-square-foot home rather than a 3,000-square-foot home, and you’re going to save yourself money. Decide to build a tiny home, which by definition are under 400 square feet, and you’re going to save yourself a whole bunch of money. The average cost to build a tiny home is about $20,000 – $30,000 for materials. Depending on whether your tiny home is mobile or stationary, you may also have to purchase land to build it on. According to the USDA, that’s about $3,160 per acre for rural land, on average in 2020. However, the cost of land will depend on the state you plan to live, certain features, like lakes, and the land’s proximity to metropolitan areas. It’s also important to note that you typically can’t get a mortgage for a tiny home, so you’ll need to look at alternative financing options.

10. Build Off The Grid

In case you haven’t caught on, sustainable living in general has become a huge trend in recent years. Which is why off the grid housing, or self-sufficient homes, are appealing to more and more people over time.

Off the grid homes rely on natural energy resources, like solar or wind powered generators and composting toilets. Many self-sufficient homeowners also take part in gardening and harvesting home grown foods.

If you’re passionate about sustainability and want to give this net zero lifestyle a try, then check out off-grid home plans or peruse the expansive online community for more information.

Work with the Right Professionals

From your architect to your plumber, hire professionals who respect your vision, prioritize your non-negotiables and work within your budget. Never be afraid to ask questions if something is unclear.

“Unfortunately, a lot of architects and other professionals speak in a language that many laypeople don’t understand and things can get lost in translation,” Greenidge says. “It’s important that everyone involved in the project understands the entire approach so it can be completed in a timely, affordable manner.”

When everyone is on the same page from the outset, you can avoid costly miscommunications and changes down the road. Builder and residential general contractor Tim Bakke from The Plan Collection says, “Work with a reputable builder with a solid track record on completing homes of similar design and budget. Successful project management is essential for staying on budget when building a house.”

Start By Identifying What You Want From Your New Home Build

The first step in building a solid budget for your new home is deciding what kind of home you want.

Determine the basics for your new home build, like: 

  • How many bedrooms and bathrooms you’d like

  • About how many square feet you’d like the house to be

  • Where you’d like to build

  • What features/functions are important to you and your family 

Thinking about how you live in your current home and determining what is and isn’t working in that space can help you to hone in on why you feel the need to build. What do you love about your current home? What drives you crazy? Coming up with a prioritized list of wants and needs is an excellent starting point. From there, most builders can give you a rough ballpark of what it will cost to build.

Choosing Your Builder

After all your preparation comes perhaps the most important part of the process – the putting together of the home itself – the crafting of it, you might say – using quality materials and following all building codes, by an experienced and knowledgeable home builder.

Following the instructions in our ebook: A Guide to Hiring a Custom Home Builder will help you choose the right builder for your project.

Our goal is to ensure that you have all the information necessary so you can make informed decisions about every step of the process of building your dream home.

How to Build Your Own House

Okay, you want to build a house. Awesome. But the three little pigs did too. And we all know what happened to them. Two of the pigs had the dumb idea to build their houses out of straw and sticks. The other pig built a well-thought-out house of brick. When the big, bad wolf came along, the only house left standing was the one that was carefully built—brick by brick.

And that’s where we get our first lesson in how to build a house.

Make a Budget

Just like the three little pigs, you need a well-built home. And to make that happen, you need to build a budget—brick by brick.

Now we know budgets aren’t as fun as dreaming about your future house, but hear us out. A budget tells you how to build the house you want and protect your future. Without it, you risk spending too much and ending up like the builder in Luke 14:28-30. That guy didn’t count the cost of building and couldn’t finish his house. Yikes!

If you do try to build without a budget, you may have to cut corners at the end of the project or else take on even more debt to get it done. Talk about turning your dream home into a nightmare!

So your very first step is to decide how much you can afford to spend. (Hint: Your monthly house payment should be no more than 25% of your take-home pay.)

Find Land

This is a no-brainer. If you’re going to build a house, you need somewhere to put it! If you haven’t already found vacant land for sale or a neighborhood development where new houses are being built, find an experienced real estate agent. These experts, also called buyer’s agents, will help you hunt down and negotiate a deal on the perfect location to build your house. A good agent will know where to find up-and-coming areas so you can plant roots in a spot that’ll make your home more valuable over time, which is what you want!

Make the Plans

Now, once you’ve found that lovely plot of land or neighborhood property, get ready to make a lot of decisions! In each phase of construction you’ll make dozens of choices that affect the cost to build your house. You’ll need to start off with a well-planned, detailed vision of the home you want. That includes things like the number of rooms and finishes.

If you don’t decide on what you want now, you’ll end up making a ton of change orders. Change orders are work items that need to be added or removed from the original set of plans. They’ll send your budget through the roof and drag out how long it takes to build your house. (Don’t do this, people!)

Build the House

To help you prepare for each stage of the home-building process, we’ve broken down the typical costs to build a home into separate stages, from buying land all the way to landscaping—and even the final sales price.

While we can’t read your mind and predict how much it’ll cost to build the house you want, we can show you what costs to expect and when. Let’s dive into our home building cost estimator!

2. DIY Without A Contractor

For those of you who already have experience with construction projects or have a network of experts among your friends and family, then you’ve probably already considered building your home on your own

If you truly have the right resources – skilled laborers, reliable and safe-to-operate tools, the right knowledge about your construction ambitions and other basics – then DIYing your build can save you quite a bit of cash in the long run. The more you choose to do yourself, the more money you can put back in your pocket.

However, you may still want to consider recruiting an architect, designer or contractor to avoid making any costly mistakes – especially if this is your first-ever build.

That said, if you’re feeling confident in your skills, the internet should be able to provide you with plenty of resources. Don’t be afraid to download floor plans online for inspiration or hit up Pinterest for some trendy home project ideas.

Homeowning Expenses Beyond the Mortgage

Getting preapproved for a home loan is an essential first step in the homebuying process, but it is only one consideration. A mortgage isn’t the only recurring expense: homeownership comes with many other ongoing costs, which buyers need to anticipate. These include homeowners’ insurance, utilities, repairs, and maintenance costs. Maintenance alone can add up: The lawn needs to be cut, the snow must be shoveled, and the leaves raked. Buyers also need to consider property taxes.

These expenses can add significantly to your monthly outlays, making a home that seemed affordable on paper pricey in reality. So you should include all of these costs and other regular expenses when determining how much home you can afford. A $1,500-per-month mortgage payment may be palatable, but add $1,500 in monthly expenses, and suddenly your obligations have doubled.

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).

Overestimate Your Costs

By overestimating the cost of building a home, you can help to ensure you have enough money saved with plenty of room for any hiccups or unforeseen costs along the way. Once you have a rough idea of how much your home will cost, add in a couple thousand more for good measure.

Cost to Build a House by Size

The average cost to build a house by size is about $100–200 per square foot.2 Let’s see how that plays out for different home sizes:

Square Feet

Cost to Build











You can see now why tiny homes are so popular, right? Before you jump on that bandwagon, think about how much space you need. You don’t want to cram your family into a house that’s waytoo small, but you don’t want to waste money on space you don’t need, either. (Unless you’ve worked hard to build your wealth and have plenty of cash saved up, in which case you can build any size house you want!)

Contact a Builder

  1. Once you’ve done all your homework, you’re ready to speak to a builder. Interview a number of them in your area. Finalizing preliminary plans should be built into the builder’s cost. Some subdivisions work with a preferred list of builders. However, there shouldn’t be anything preventing you from bringing in your own builder, as long as any neighborhood covenants are considered. If you correctly budgeted and planned, you may save money on builder’s fees since you’ll have done some of the work already.

House Exterior Material Costs


When it’s finally time to break ground on your new home, the first expense is excavation. Costs can range from about $1,400 to $3,200 and it prepares the site for a sturdy foundation.


The foundation is one of the most important parts of your home and also a large portion of any construction budget. Expect to spend between $4,500 and $13,500 for a typical slab foundation.

A foundation with a basement ranges from $18,000 to $80,000. The high end of this range means more livable space and a finished basement.


Your new home begins to really take shape during the framing stage of construction. Framing is the highest material cost for most new home builds. High-quantity lumber framing averages $33,000 for a home in the U.S. This includes floors, walls and roof trusses. Metal stud framing systems start at about $20,000.


Most home builders install affordable asphalt shingles. Shingle roofing costs between $5,500 and $11,500. The total cost of your new roof depends mostly on which type of roof you choose.


Like roofing, high-quality weatherproof wrapping and exterior siding is an investment in the durability of your home. Siding costs an average of $12 per square foot. You can choose from several types of siding, such as affordable vinyl or high-end natural stone.


A paved driveway costs roughly $4,500 while a gravel driveway averages much less, at just around $1,500.


Taking your home from the construction zone to a beautiful finished product requires a landscaping budget. Expect to spend something like $2,000 to install sod grass and other plants.

You can spend as much or as little money as you want on the garden, but remember that the curb appeal of the home may matter down the line. Planting flowering or fruit trees now means you get to enjoy their fragrance and produce for years to come.

Building Cost Estimator

Labor and material costs make up the bulk of home building expenses, and these depend heavily on supply and demand in your area. Always compare quotes from local construction professionals.

Type of Expense Amount

Off-site living accommodations (7 months)

$8,600 – 11,900

Water and sewer inspections


House plans

$500 – $3,500

Construction project management fees

$3,000 – $52,000

Building permits


Impact fee or local charges








Exterior Siding




Exterior windows and doors














Trim and interior doors




Cabinets and countertops


Plumbing fixtures


Lighting fixtures












Find Your Neighborhood

  1. Real estate values greatly vary from neighborhood to neighborhood, and from city to city. If there’s a particular area you want to live in, do some research on the average cost per square foot of the homes in the area. Find out what the average lot price is in your desired neighborhoods, then determine how many square feet you need. This is a quick and easy way to discover what areas you can and cannot afford. A quick check of selling prices in your desired neighborhood and a phone call to a few developers selling lots gets you the information you need. When you’re done, you’ll have a close estimate of what you need to spend.

Remember: No Budget is Set In Stone Until You work with a Builder

Once you’ve run through each of the costs outlined above, you should have a fairly good idea of what you need to budget for your new home, and where each portion of that budget is going. It’s important to remember though, that no budget is set in stone until after you’ve worked with a builder who has provided a final contract price. The builder you partner with to build your home is the only one who can give you a final number on exactly how much you’ll spend. 

If you have questions about what to expect from the building process from this point forward, we recommend this blog on The 6 Steps of the Custom Home Building Process.

Determining a budget for a new home build can feel overwhelming and stressful, especially in a robust market like Ann Arbor. If you have questions about what to expect, or how to plan a budget that is realistic for the area, talk to the team at Meadowlark Design + Build.


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