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Apr 27 2027

Building a Budget for a Construction Loan

Good planning for a new home build will save lots of money and time in the long run. In fact, the majority of construction loan programs require many details. In order to build your construction budget and obtain a loan, you must establish a few budgets: Site Costs, Soft Costs, and Build Costs. Many people figure they can throw an arbitrary square foot price at a new construction build, but more often than not, most owners easily spend 30% over their budget by the time construction is finished. Review the following three budget items to get an idea of what you are jumping into when planning a new home project

Site Costs

Site costs encompass everything that goes into improving a piece of property in order to build on it. This is by far an exhaustive list, but start with Waste, Power, Water, and Grading. I published another video that talks about the importance of sewer and septic, be sure to check that out. Waste includes the ability to connect to a sewer or installation of a septic system. Every modern home must have power. Although solar is a 100% off-grid option, a home that is connected to the grid will be connected either “Overhead” or “Underground.” Overhead simply means that the main electrical will attach to the house via an “overhead” power line coming from a nearby power pole. Underground simply means that the electrical main will trench to the house from a nearby utility box in the dirt.

Water is another site cost which is typically supplied from the city tap or from a well. If both of those options are unavailable, shipping water in and storing it with a cistern is a viable option. Grading has a big impact on site costs and varies in cost a lot depending on the soil conditions and city/county zoning requirements. This is NOT an exhaustive list, but it is a good place to start.

Soft Costs

Soft costs include permits, fees, plans, and design. Every municipality will have its own permits and fees, so make sure you know what fees are waiting for you. Fees could include building fees, school fees, park fees, traffic impact fees, fees for the fire department, etc. Oftentimes multiple permit fees may be required since building a home encompasses many aspects of grading. Permit fees could include plan check fees, grading permit fees, septic permit fees, inspection fees, etc. 

Plans and design costs usually encompass your costs for hiring an architect or draftsman. I personally prefer to use a Design Builder because they not only have a draftsman and/or designer available to use, they also know the current trends on material pricing and typical labor time frames to complete construction milestones.

Build Costs

Build costs get into the square foot price of your home. Keep in mind that living square footage is more expensive than non-habitable space. Kitchens and bathrooms increase the finish level most because they include cabinets, water features, electrical finishes, nicer floors, and oftentimes granite or tile surrounds. A non-habitable space, such as a garage, typically has the same framing impact, but once the drywall is painted, there’s very little material left to install and finish. Due to this fact, I like to initially separate square foot pricing into at least the following three divisions: Liveable square footage, Garage square footage, and Covered Porches/Decks square footage. Here’s an example:
Liveable Space: $165/sf
Garage Space: $80/sf
Covered Porches & Decks: $80/sf

Separating these amounts allows you to dial in a better taste of what you’re looking for. What if you want a simple garage but have a fine taste for elegant finishes inside your home? Perhaps you’re quite practical and want moderate or conservative finishes on the interior, but you want a garage that allows you to work on your vehicles and big-boy-toys. Using this system allows you to play with those rough adjustments before spending weeks with a designer only to find out that you can’t afford to build the home you settled on after paying thousands in design fees.

Ballpark Budget

I’ve helped many customers pre-plan their ballpark budgets in San Diego, California before talking to a draftsman or architect, which in turn saved hours upon hours of time and dollars when designing a new home. Whatever your situation, there’s a Juicy Solution waiting for you and I’d be more than happy to consult with you on this new adventure of building your new home. I now operate in Colorado, so give me a call or shoot me a text or email so we can schedule an appointment to evaluate your situation. Take a look around my website and also check out my cousin’s tutorials at THE REAL PROPERTY SHOW for more helpful tips! Also checkout this HELPFUL VIDEO.

Looking for a Design Builder in Colorado? Send me a request in the message box and I’d love to point you in the right direction!


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