Budgeting the costs of design and construction is an important first step to help you avoid surprises and frustration. Share with your architect your budgetary goals and constraints. Only with full knowledge of your budget can your architect design within your constraints and allocate your project money wisely.

Below are some easy ways to stay on budget

1. Sketch it out

Planning is the most important part of the construction process. Make sure you plan the details of your house – from the direction to the layout to cabinetry. You can always upgrade finishes in the future…but it is much harder and more costly to add square footage after your build.

There are a number of useful tools for planning out the design of your home. Sites like Floorplanner and RoomSketcher let you create mock floorplans. Consider creating a Pinterest board or Instagram followers with design ideas that inspire you, and that you’d like to emulate. These can be a good point of reference to show your architects before construction is underway.

2. Budget more than you expect with contingency plans

No matter how much you think the building process is likely to cost, it’s likely going to cost more.

Although much is done to research the site of your project or to predict conditions in an existing building before renovation, there are sometimes surprises that are not revealed until demolition or construction. Examples of these hidden conditions are poor soil, underground tanks or piping, plumbing leaks or inadequacies, asbestos, mold, structural deficiencies, and insect damage. Leave extra room in your budget (a “construction contingency”) to cover the cost of resolving these problems. Depending on the project’s size and complexity, a reasonable contingency is between five and 10 percent of the total cost of construction.

Another type of contingency you should budget for is called the “client contingency.” Reversing or remaking decisions about the design after construction begins is very costly because your builder must reschedule his or her subcontractors, remove and rebuild areas already completed, and quickly obtain materials or components not currently onsite.

On the other hand, the opportunity to do things right should include the occasional good idea or change of mind as an anticipated cost in the budget.

3. Get your financing in order

Chances are you’ll need a construction home loan to finance the process. A construction loan is a short-term, variable-rate loan that’s used to pay for the building or renovating of a home while it's being built. Funds are released to the borrower as they complete the work. This is a popular home loan option for people looking to build a house or rehabilitate a house. A construction loan allows the borrower to get paid for supplies needed on the job to complete the work.

One of the biggest differences between a mortgage and a construction loan is that with a construction loan, the lender will pay the money out in draw periods, which are based on milestones of the home construction project.

Before you seek out financing, make sure you have a detailed plan in place. It’s also wise to have a lawyer look over the contract before you sign.

3. Do your research

Building or renovating your home is one of the most important decisions you make. Ensuring that you have selected the right architect for your needs and budget will head off problems down the road. You’ll be working with them for many months, and it’s important to develop a trusting relationship.

There are several factors you should consider:

• Credentials
• References
• Past work
• Style
• Personality
• Price

Download our Budget Worksheet here.

This article is one of many resources in the Homeowner's Project Handbook. The Homeowner’s Project Handbook (HPH) provides a directory of AIA architects working in Massachusetts, while highlighting the value that architectural expertise brings to new construction and renovation projects. Explore this free, sus­tain­able, search­able dig­i­tal resource for home­own­ers and small busi­ness own­ers con­sid­er­ing ren­o­va­tions, addi­tions, or new con­struc­tion projects.