Building a new home begins long before the foundation is poured. To help you avoid costly mistakes during the construction process, we’ve identified five important steps you should know about before you build. Last month I presented this topic at our Custom Home Buying Seminar to several prospects in Waltham, MA. It was well-received by an audience that is looking for guidance on this sometimes overwhelming process. Over the next five weeks, we will highlight a new step in the process and hope it is helpful to you as you think about building your new home.

Step 1: Plan your Budget

As you prepare to start the homebuilding process, your first step should be determining how much you can afford to spend. Although it seems obvious, many people do not start by nailing down a budget. You will likely need a construction loan and a mortgage and it's never too early to find out what size loan you qualify for. Don't depend on the advice of friends or family. Talk to your banker, accountant or financial adviser. They can simply and quickly let you know how much you can safely spend.

As you prepare your budget, in general expect that 20 to 25 percent of your new home project will go toward the land. And don't forget to account for the hidden expenses that aren't included in the building contract (furniture, appliances, landscaping, etc.) Knowing your limits will help you modify your building plans to meet your budget.

Planning your budget is a critical step in starting off on the right foot with an architect, builder, or any other vendor you will need to work with in the homebuilding process. Doing your upfront research will save headaches later.