We have found that the biggest mistake a homeowner makes when making construction or renovation decisions is applying a fair budget to their project.
First, if a homeowner is approved for a loan to build a house for $500k, then we believe that homeowner should be trying to build a $415k house. We believe that the build-to-loan ratio should be 80/20% The reason for this is to leave the homeowner room to be free to make changes or upgrades to their home during construction. It allows the homeowner to build a nicer home with finishes that they will love, instead of settle for.
It also gives a cushion for the “unexpecteds” in construction. You can just about guarantee that there will be something unexpected that will happen during the build process. Whether this is finding rock when installing the foundation that has to be drilled or broken out, or getting an increase in material cost, or losing the availability of product that was initially priced for the build.
The most common mistake we find is that homeowners purchase “as much square footage or house” that their loan will buy as opposed to approaching this conservatively.