Building Your Custom Home: A Comprehensive Budget Guide
- C.J. Christensen
- Dec 28, 2025
- 3 min read
Updated: 7 days ago
Building a new custom home is one of the most significant investments many people will make. Establishing a realistic budget is one of the earliest and most consequential steps in the process. While every project is unique, there are consistent cost categories that shape the financial picture for nearly any new home: land, construction, sales tax, architectural design, engineering, and permitting. Understanding how these pieces fit together will help you make informed decisions long before construction begins.
1. Construction Cost
Construction costs encompass the labor and materials required to build the home as designed. In high-demand markets, you will want to reference current cost per square foot ranges for custom residential work. These often vary based on architectural complexity, site conditions, and desired level of finish. Early construction estimates are typically expressed as ranges. Precision improves after schematic design and again after construction documents are complete.
As a rule of thumb, owners should plan for a contingency reserve. This reserve accommodates unforeseen conditions or discretionary upgrades.
2. Sales Tax on Construction
In many jurisdictions, including Washington State, sales tax applies to the construction contract. This tax is calculated as a percentage of the construction cost. It can represent a substantial line item in your budget. Because sales tax is directly tied to the final contract amount, it is important to account for it early. Adjust your overall budget as construction pricing evolves.
3. Architectural Design
Architectural services typically represent a percentage of construction cost or are structured as a fixed fee tied to the scope of work. The fee covers the development of design concepts, detailed drawings, coordination with consultants, and support through permitting and construction. Comprehensive architectural involvement leads to more accurate pricing, clearer communication with the builder, and a smoother construction process. Each of these factors protects your investment.
4. Engineering
Engineering fees vary based on site complexity and the structural design requirements of the home. Most projects require structural engineering at a minimum. Depending on your site, you may also need civil engineering, geotechnical analysis, drainage design, or other specialty consultants. Engineering is tightly integrated with the architectural process. It contributes directly to the constructability, safety, and long-term performance of the home.
5. Permitting
Permitting costs include jurisdictional fees for building, land use, utilities, and plan reviews. These fees vary widely by municipality and by project type. Some jurisdictions also require impact fees for services such as schools, roads, or parks. Permitting timelines can influence the overall project schedule. Therefore, it is wise to understand both the cost and the process early in planning.
Developing a Holistic Budget
A robust budget ties all of these elements together. It balances your site potential, design aspirations, financial parameters, and project timeline. Engaging your architect early, ideally before land purchase, ensures that each decision is grounded in an integrated understanding of design, entitlement, and construction realities.
Thoughtful pre-design planning yields more predictable outcomes. It reduces risk and helps align the entire team around a shared vision. If you are considering building a new home and would like guidance on budgeting, feasibility, or site selection, I am happy to discuss your project.
For a deeper look at typical cost ranges for new custom homes, including construction costs, architectural and engineering fees, and permitting costs, download our Project Budgeting Guide. It provides more specific guidance to help you understand the financial framework of a well-planned custom home before you begin design.
