How Much Does it Cost to Build a Home?

by Washington Federal Team on September 23, 2011

When planning the budget for your custom home, a good rule of thumb is that you’ll pay about $100 per square foot for a basic home. But that’s just a starting point.  Costs could change dramatically depending on decisions you make as you prepare to build your dream home.

How much does it cost to build a home? There are many factors to consider as you plan your home and you budget. Costs may vary a bit based on local labor and materials costs, here are some other items to take into consideration.

Building Site

A hilly or rocky site requires more preparation and planning than a flat plot, and thus costs more. Plan to budget for extra foundation work and perhaps special engineering services. Additionally, land costs can vary dramatically. A plot of land in a city will be significantly more expensive than a plot of the same size in a rural area.

Shape of Home

Rectangular-shaped homes are less expensive to build than homes with many sides but the same square footage.  Factor in more for additional windows and siding. Generally, the more angles a home has, the larger the material and labor costs will be.

Quality of Materials

Here’s where the cost of a home can skyrocket.   If you must have the granite countertops and marble floors, or a spiral staircase, be prepared to pay. Custom lighting, elaborate woodwork and luxury bath fixtures can also add thousands to the cost. Pay attention to the materials that seem “standard” in the neighborhood where you’re planning to build if you want to avoid an overpriced home when it’s time to sell. If you’re flexible, you can save when choosing the wood for your hardwood floors or materials for your countertops.

Inflation and Market Conditions

One aspect of the building process that you can’t always plan for is inflation. Building costs tend to increase 3-6 percent each year, so if construction will take 12 months, you should factor in potential cost increases.


There are different loans to finance the construction.  You can get a construction loan and after construction is complete a permanent loan.  It is less risky to obtain one loan that will wrap the construction and permanent financing together.

Factoring in all the variables that can impact the cost of your home can be complex. An online calculator takes all of these into consideration and gives you a rough cost assessment.  It’s important to note that these calculators can’t cover everything.

Take this base estimate with you when you make an initial appointment with a lender.  A good loan officer will have hands-on experience with custom-built homes and can point out any areas you may need to explore further.  Also, make sure that the contractor you hire is an expert. Based on your design, the right contractor can give you a firm bid for your home. A well-respected contractor may be more expensive – but his or her expertise and guidance during the process will be well worth the cost.

If you are interested in building a custom home, let us help. Our branch managers are experts who personally visit your construction site for inspections and work with you to help ensure your home is built on time and within your budget. We’d love to chat with you about how to make your dream a reality.

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