5 Hidden Costs of Building a Home You Probably Haven’t Budgeted For
Written by
Adam Palasciano
Edited by
Jenna Klaverweiden
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Buying a home has long been a cornerstone of the age-old American dream. Putting down roots and building equity can provide stability and help build long-term wealth.
However, for some, building a home might be more appealing than simply buying a home that’s already constructed. By building your own home, you can customize just about everything to your exact specifications and preferences. However, it will all come at a big cost.
Here are five hidden costs of building a home you probably haven’t budgeted for.
Also see three rooms to add to your home to improve its resale value.
Land and Site Preparation
Before you even start building, you’ll need to purchase land. According to LandSearch, the average price per acre in the U.S. is over $18,000.
Once you buy a piece of land to build your new home on, there will likely be a ton of site preparation work before the construction can begin, per Bauwise. For example, clearing the land of trees, removing any large rocks, leveling the surface, digging and installing the foundation can all cost quite a lot of money.
Building Materials
Most people budget for the basic building materials needed to buy a house, like lumber, roofing and insulation. But it can be easy to forget the many other materials that’ll be needed down the line, like windows, doors, plumbing, electrical fixtures and more.
As Bauwise noted, it’s important to add in delivery fees for the building materials as well. Depending on the location of the land, these fees could be substantial.
It’s crucial to budget for all necessary building materials and supplies before you get started so you don’t find yourself building a home that you can’t actually afford.
Utility Connections
It’s important to note that when you build a new house, you’ll need to connect it to utilities, like gas, electricity, water and sewage. Connection costs may vary depending on your location, the type of utility connections you need and your home’s distance from the nearest utility lines, per Bauwise.
According to Angi, the average cost to set up utilities on land is $20,400, but that can vary based on a variety of factors.
Plan ahead and be aware of what these costs will be before you start building, if possible, so you can be sure they’re included in your budget.
Permits
Generally, building a home requires obtaining permits and approvals from your local government. Depending on your location, these usually include environmental permits, zoning permits and building permits.
According to HomeGuide, a permit to build a home can cost between $1,000 and $3,000, on average.
However, expect these fees to vary based on location, the size of your property and the type of permits required for your home.
Closing Costs
Some closing costs you may incur include the appraisal, home inspection, taxes, transfer fees and homeowners insurance. According to Caroline on Design, your closing costs might be lower if you roll your construction loan into the final mortgage as opposed to getting a new mortgage for the completed home.
It’s important to speak with your builder and your lender to estimate what you might expect for closing costs before you get started on the project. This way, you can carefully incorporate closing costs into your home-building budget.
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