Funding Your Dream House: How to Save for a Custom-Built Home

Building a new home comes with a lot of excitement. However, it can also breed anxiety. Even so, the benefits of constructing a custom home are tremendous. You have more control over the design and can arrange the layout however you want.

One of the most significant factors you must consider before building a home is how you will fund it. While this can seem like a daunting task, there are many steps you can take to save for and acquire your dream home.

Set Concrete Goals

Goal-setting is a fundamental part of reaching any target.

Begin by defining your dream home. Consider the construction style, plot size, number of bedrooms, square footage, facilities, and features. This will give you a clear vision of what you want and help you determine how much you need to save.

After setting realistic goals, create a simple budget. Work out how much you can save for a deposit on the development mortgage without sacrificing essential costs.

Establishing a timeline for saving for and building your home is also important. Doing so will help you maintain realistic expectations and stay motivated. 

Develop a Savings Plan

The next step is to work out how you will save the money. This phase is often the most demanding. 

Assess your current financial situation

Look at your current expenses and determine where you could save more money. As you go through your spending, there are some key questions to ask yourself, such as: 

• How much money am I bringing home every month?
• How much could I bring home if I worked more hours, took on more projects, or worked a second job?
• Where am I currently spending my money?
• How much could I save if I stopped spending money on things I don’t need?

Evaluate the difference between your spending and savings now and compare it to what you could achieve. Ask how much you could save if you lowered your expenses and increased your income. Again, use this as an opportunity to set achievable goals. 

Create a dedicated savings account

Next, open a dedicated savings account for your money. Look for options offering higher interest rates or investments in specific securities. Leveraging these perks will help you grow your savings faster. 

Set aside a portion of income each month 

Automatically set aside money monthly and deposit it in the savings account (or investment brokerage). Cutting unnecessary spending can help you make progress toward these efforts. Some expenses you could consider eliminating or reducing could be: 

• Entertainment expenses
• Eating out
• Shopping trips 
• Vacations
• Unnecessary services, like dog grooming or pedicures

Take Advantage of Financial Tools

After that, take advantage of financial tools that might help you. Explore mortgage options for custom-built homes such as: 

• Self-build mortgages in arrears (where you receive payments from the lender after each completion stage)
• Self-build advance mortgages (where you receive funding at the start of each phase to support cash flow)

You can also leverage construction loans for self-builds. These last anywhere from 12 to 18 months and provide the cash you need during the construction of the property. Again, you usually won’t receive the full loan amount upfront. Instead, the lender will provide “disbursements” throughout the build, leaving you to pay interest-only installments.

To qualify, you need a good credit score (over 700) and a 25% to 30% down payment. You will also need to provide a timeline for when you will complete each phase and how much cash you will require. Banks usually only let you work with licensed contractors; otherwise, you could breach the loan terms. 

Sometimes, you can access home construction grants from the government or other entities. Fannie Mae’s HomePath provides up to 3% closing cost assistance, while the National Homebuyers Fund’s DPA gives you up to 5% of the mortgage loan amount. 

Plan for Unexpected Expenses

While saving, it is essential to continue to plan for unexpected expenses. These can range in quantity and price, but it is always good to be prepared. Whether your car breaks down, you require spontaneous medical care, or your home needs repairs, being prepared can spare you from excess stress.

An emergency fund is money you keep aside when problems occur. These funds are essential because they keep you afloat during tough times.

Work with Professionals

When self-building, it’s worth doing your research to ensure you partner with the right architect and builder. You want to hire professionals who can turn your dreams into reality. 

Going for the cheapest construction team often burns you in the end. While top professionals save you time and money, low-quality firms increase costs and force delays. Furthermore, they may not help you navigate regulations effectively, leading to potential legal issues further on. 

When searching for architects and builders, look for: 

• A quality portfolio brimming with successful projects
• Experience with complying with building codes
• Expertise in project management and construction oversight
• Problem-solving skills (for when plans don’t match reality)

Ideally, you want to find professionals who can monitor your expenses throughout the project and update you whenever new costs emerge. Always track milestones and review your spending to see if you are allocating resources appropriately. 

Stay Motivated and Flexible

Finally, building a dream home can take a long time, so stay motivated and flexible. Keep the end goal in mind, even if there are ups and downs involved in getting there. You won’t always want to save money, but if you can focus on the reward, it will be easier. 

Remain flexible and motivated as much as possible throughout the process by: 

• Permitting different housing types to be on your wishlist
• Being okay with renting a smaller apartment while you save
• Exploring superior savings options (including investing)

Choose Guardian Homes

In summary, saving for a custom-built home requires patience and tenacity; it doesn’t happen overnight. However, it is achievable. Eventually, you will get there if you save consistently, invest safely, and avoid frivolous expenses. 

To learn more about building your dream home, contact Guardian Homes. We can show you what your home might look like and help you determine a budget.