Estimated Cost of Building a New Home

The largest expense for building a new home is the materials, which is what will most likely affect the size of your budget. A huge range exists between the total cost for the same sized home that is built to luxury standards vs. one that has the basics. Just stating that you want a four-bedroom, three-bathroom tudor will not give you enough to estimate the cost. For example, top-of-the-line appliances and real wood cabinets will run more than double what you'd pay for basic appliances and compressed wood.

While it would be lovely to have a vision you could easily translate into brick and mortar (or stone and marble), you are going to work with a contractor to see what is feasible for your budget. The contractor will hire a variety of workers and pay them going rates for their labor to provide you with results you want. Consider how much work will have to go into this house—the more detailed the labor, the higher the cost. You often get what you pay for, so don't necessarily go for the cheapest bid.

You may find the perfect plot of land only to discover that zoning laws don't allow for the height you want or the size of the yard. More likely the local government will allow lots of leeway—if you pay for it. You may have to pay thousands of dollars for permits or for redesigns if your plans don't fit into the building restrictions. So find out as much as you can before you get started on the house plans, but be prepared for surprises.

"You know how it goes." That's a common answer to why it's taking so long to finish the house. True, many issues and last-minute decisions come up during the construction of a home. Take the time to get the plans, choices and details right the first time, even at the cost of delay and, well, higher cost. For example, many municipalities charge what is called an impact fee, which is a charge for city improvements necessitated by your building. Emily Pack of "The Wall Street Journal" tells a story about one family that was charged over $200,000 in impact fees (they sued and the fees dropped). Set aside a specified percentage in your budget to deal with unforeseen expenses.