Tips
New construction budget and home remodel costs: What to expect
If you’re just beginning your project, it’ll be a while before you have a budget in hand, but you’re no doubt wondering what to expect. Here’s an introduction to the expense categories you’re likely to find in your project budget.
The first time you see a budget for your new construction or remodeling project, you’ll want to be sitting down. Preferably at a table with your builder so you can ask all your questions. A budget for a custom home could easily climb into the seven figures and will no doubt include dozens of businesses, so it’s going to be complex.
However, taking the time to truly understand it will help you feel confident in your decision-making and your builder’s expertise. Ultimately it can build the foundational trust you’ll need to work together effectively.
Let’s take a look at the major categories of expenses associated with building so you’re not surprised when you look at your own budget for the first time.
What are the main expense categories in a project budget?
A typical budget for a new construction home or major remodel will be hundreds of line items long. This isn’t that. Instead it’s a look at the main categories of expenses you’re likely to see in a project budget with details about what’s typically grouped under each category. Keep in mind there will be costs associated with both materials and labor.
For example, the cost of windows includes the window units, installation materials (flashing tape, sealant, nails), any equipment rentals (like a boom), and the labor required to install the windows.
That level of detail can quickly become overwhelming, so we’ve deliberately kept this list simple, which means it’s not comprehensive. It’s an overview of what’s typical.
Site work
What’s included? Site work expenses may include things like:
- Building permit fee is what’s required by your local government in order to build a new home or remodel an existing home.
- Impact fee is what your local government charges to offset the impact a new home will have on infrastructure and services, like utilities, schools, public safety, and recreational facilities.
- Water and sewer inspection fees are charged by your local government when inspectors come to assess that all required conditions related to plumbing and sewer lines have been met.
- Architecture is the fee you pay your architect for designing your home and any other services rendered during the construction phase, like project management.
- Engineering is the fee paid to any engineers consulted.
What should I expect to pay my pros?
Builders’ fees vary, but a typical range is 10–20% of the total construction costs. Interviewing several builders before hiring will help you gain an understanding of the typical rate in your area — learn more about hiring a good builder. Architects’ fees vary, but 8–15% of the total construction costs is typical — learn more about hiring a good architect.
Foundation
What included? Foundation expenses may include things like:
- Excavation of the foundation and driveway as well as any grading required on the site.
- Foundation materials, like rebar, gravel, drainage tile, and the labor plus equipment required to construct the foundation.
- Concrete pouring for footings and slabs, concrete blocks used to build the foundation, and more.
- Retaining walls material, drainage materials, footings, and more.
- Backfill, or moving dirt and other materials in a way that supports the foundation, allows for drainage, and more will likely include equipment rental and labor costs.
Framing
What’s included? Framing expenses may include things like:
- Framing, or the materials needed to build the bones of the house, including lumber, nails and fasteners, weather resistive barrier (WRB), flashing, and more.
- Trusses, or the structural supports under the roof, are often bought prefabricated.
- Sheathing, or all that’s required to install the material, often oriented strand board (OSB), that’s layered over framed walls, the roof, and floors to provide structural stability, and more.
- Structural steel needed to support the framing, and could also include rental of equipment, like a boom.
Exterior finishes
What’s included? Exterior finishes may include things like:
- Exterior wall finish the actual siding, along with trim; and any extras, like shutters.
- Roofing materials, installation materials, and labor.
- Windows and doors products; installation materials, like flashing; equipment, like renting a boom; and the labor to install.
- Garage doors the doors themselves and all related details, like installing the openers.
How much will windows and doors cost?
We asked this question to a number of builders, and most felt allocating 10–15% of the construction budget was fairly typical. Of course, the actual cost will depend on your project’s design. For example, modern homes might be on the higher end because expansive glass is a signature feature of this style.
Major system rough-ins
What included? Major rough-ins expenses may include things like:
- Plumbing pipes to spigots and fixtures. Radon mitigation could fall here too.
- Electrical wiring to light fixture installation and any outdoor lighting systems.
- HVAC makes up the heating, ventilating and air conditioning systems as well as things like a kitchen hood vent, bathroom fan, dryer vent, dehumidifier, etc.
Interior finishes
What included? Interior finishes may include things like:
- Insulation
- Drywall
- Interior trim (baseboards, stairs, handrails, etc.)
- Glass and mirrors
- Painting and wallpaper
- Lighting
- Cabinets
- Countertops
- Tile
- Appliances
- Flooring
What’s value engineering?
Value engineering is the process of deciding how to balance functionality, quality, and cost by making changes to the design, methods, or materials originally planned for. Practically it’s what happens when a project is over budget, and it becomes necessary to reduce the square footage, swap in less costly finishes, and take other cost-cutting measures.
Builders and architects advise against value engineering the building envelope, or the components that protect your home from the elements, like your walls, windows and doors, roof, and foundation.
"[When value engineering] try to start with the things that can be changed later. Keep the building envelope and HVAC systems, and scale back on finish quality and square footage. Try to spread the cuts across all line items, rather than taking the quality out of a single component, like windows."Nick Schiffer, Owner of NS Builders
Remember, you can upgrade your countertops later or put up wallpaper after the fact, but it’s going to be a lot more costly to open up your walls and replace low-quality windows that failed prematurely.
Find more pro tips on how to make cuts when your project is over budget.
Final steps
What’s included? Final steps may include things like:
- Landscaping
- Decks, patios, and porches
- Driveway
- Cleanup
Other costs
What’s included? Other costs may include things like:
- Land/lot is where you’ll build your home, of course. It’s a necessary prerequisite and not something the builder will provide, unless they’re also a developer.
- Job site conditions are the necessary items your builder will need during the project, like dumpsters, temporary utilities, temporary fencing, equipment rentals, etc.
- Upgrades like fireplace(s), a pool, hot tub, or sauna — really, the list is endless. Features like these will add complexity and cost.
Your new construction budget FAQs answered
Why are windows and doors so expensive?
It’s a fair question. The answer is windows and doors are expensive because they must protect the home from the elements, look beautiful from inside and out, and open on demand. There really isn’t any other component in a home that’s comparable in terms of functional requirements and aesthetic expectations.
Windows and doors are durable, beautiful, and deliver long-lasting results by using quality materials, design, and manufacturing. These factors contribute to their prices. However, when you truly understand what windows and doors do for a home — including the intangible effects of natural light and views — you’ll probably agree this isn’t an aspect of the budget where you want to cut quality.
You’ll find good builders and architects understand the importance of these components in supporting a building’s long-term integrity. Your pros can guide you in selecting high-quality windows and doors that fit your budget.
How much does it cost to build a new home?
The person best equipped to tell you the cost of your new construction home is your builder. However, if you’re early in the process and looking for the information needed to understand whether you can afford to build, here are some ideas:
- Look at the national average for building a home. The National Association of Home Builders (NAHB) is a good resource. While a national average won’t be specific to your market, it’ll give you a baseline. You’re likely aware of whether you live in an area where the cost of living is higher or lower, so consider the national average a preliminary input.
- Observe your local market. You could do this by watching the real estate listings in your area and getting as specific as possible. Look at the neighborhood where you actually want to live or as near to it as you can find listings. Reach out to a real estate agent who specializes in new construction for more information.
- As you interview builders, ask them the cost per square foot they’re seeing. Remember this is again an average. It’s not a guarantee the cost of building your custom-designed home will match the average cost per square foot, but it can help you form a big-picture idea.
None of these inputs will give you an exact cost, but they could help you begin to realize a range you could compare to your budget in order to understand if building a home is feasible.
How do I know my builder is charging a fair price?
It’s a combination of things that’ll help you trust your builder is charging a fair price.
- Hire the best builder you can find. Someone who not only has the skills to construct a durable and beautiful home, but someone who’ll be a good partner throughout the lengthy process of building a home. We’ve got tips to help you hire a good builder.
- Fee structures can lend transparency. Specifically, cost-plus, which means you’ll pay the cost of construction as you go. So you’ll see the cost of materials, subcontracted labor, and everything else when you’re invoiced. You might even be involved in selecting subcontractors. For more on this topic, we suggest reading about why bidding isn’t always best.
- Understand and accept the real cost of construction. Some of that understanding could come from taking the time to do the preliminary research suggested above — looking at national averages and your local market, speaking with a realtor, etc. It can also come from understanding the true complexity of building a new construction home and looking at a budget, as we’ve done here. Planning the project properly also helps develop this understanding, and that’s most effectively done through involving your builder during design by hiring them for pre-construction services.
Up next
Tips
Is bidding the best approach to hiring a builder?
Traditionally, bidding has been the established way for homeowners to select a builder. But is it the best way? And if not, what should you do instead?
