Managing New Home Construction Costs

brick rural home

Families often know what they can spend on a country home. They are less certain about how to keep their construction project on budget. 

Our Rural 1st® consumer lending officers are experts in rural home financing and can advise homeowners on the best practices for controlling construction costs at every stage. Below, we focus on one of the early decisions in the construction process – selecting your contractor.

Pre-Built Contractors

Whether they are building a modest or grand home, families looking to be more budget conscious may choose pre-built construction. Homeowners like the cost control that comes with signing a contract in which the price for every design and material choice is locked in for the pre-built portion of their project, said Brandon Rohlfsen.

Pre-built homes are constructed off site in a controlled environment and delivered whole or in sections to a prepared site. Homeowners select their home model, then customize it with finishes that fit within their budget. Subcontractors hired by the homeowners do all on-site work, such as building a basement. 

If homeowners encounter additional costs, Michelle Sandin said, it generally involves the site work, which can include everything from wells and septic systems to final grading and landscaping. Rural 1st factors 10 percent into its loans for pre-built homes to cover unplanned costs.

General Contractors

On-site construction involves more variables, such as weather-related challenges, that can potentially impact the budget. But a good general contractor will manage overall costs so an increase here and there doesn’t break the budget, Michelle and Brandon said. 

Some general contractors, like their pre-built counterparts, offer a selection of home models at price points that correspond to square footage, features and finishes. Brandon said customers find this approach to be an effective way to control the budget. When they end up spending more, she said, it generally is because they decided to go beyond the pre-determined work, perhaps deciding to install additional landscaping or finish a basement.

With custom home plans, families can get exactly what they want. To also stay on budget, it’s important to hire the right contractor for the project, understand exactly what you are getting for your money, then track expenses against progress to ensure the work aligns with the construction bids, Michelle said. Homeowners should count on some cost overruns; Rural 1st builds 15 percent into contractor-built homes to cover these costs.


Those with the right know-how can save money by serving as their own contractor. But Michelle and Brandon caution that it is easy to over-estimate the savings while also underestimating budget-busting pitfalls.

Brandon said he has had customers who think they can reduce labor costs by putting their skills to use on the job site, only to discover their materials are more expensive. “General contractors can get discounts that may or may not be available to you as a self-contractor.” 

Time, or lack of it, also can result in cost overruns, Michelle said. When planting season rolls around for a farmer/self-contractor and the work remaining on the house is longer than the family’s patience, the most immediate solution is to hire a subcontractor – often for a premium price, she said

Self-contracting can be rewarding. It also carries more risk for those who have little to no room in their budget for unplanned costs, Michelle said. Rural 1st builds 30 percent into self-contracted home loans for possible cost overruns. 

Good lenders can help you identify the approach that is right for your budget and the housing needs of your family. Contact the consumer lending officer at your local FCSAmerica office to learn more about financing your rural home. 

Rural 1st® is the tradename and Rural 1st®, the Rolling Hills Window icon, Rural Logic, and Closer to What Matters are exclusive trademarks of Farm Credit Mid-America, NMLS 407249. Rural 1st® products are available to consumers within the territories of participating Farm Credit System Associations.


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