Building a new home is expensive. In addition, because you pay for your new home in installments (one sum for the lot, another to the architect, and a third to the builder, for example), it’s often hard to get a sense of exactly how much your dream home costs.

If you’re trying to control your budget for a new home, or even just thinking about building a house, understanding the cost of construction is key. Knowing the various costs involved in new home construction will make the home building process simpler and more transparent.

Building Cost Basics

If you’re building a new home, you’re responsible for all aspects of the process, from buying the lot to getting the yard landscaped. That’s one reason why building a home is so expensive. Unlike an existing home, which comes with a relatively straightforward “sticker price,” when you build new, construction costs are often hidden.

Unfortunately, there is no easy answer to the question, “How much does it cost to build a new home?” That’s because the cost of land, materials and labor can vary widely based on where you live and other factors. In general, estimates for the cost of building a new home range from $80 to $200 per square foot.

Construction Cost Breakdown

Before you begin thinking about building a new home, it’s important to have an idea of the different costs involved. Some of the major expenses involved in building a new home are:

• Architect’s fee
• Purchasing a lot
• Labor
• Materials
• Permits, inspections and other fees

While the core elements involved in building a home are the same for most projects, how much you spend on each of those elements is up to you, at least to a certain extent. Though there may not be a lot of variation in the cost of construction labor in your area, you can control how much you spend on the house itself. A large, custom home with an unusual design and luxury features will naturally cost more than a more modest, traditional design. As you plan your budget, remember to think about all the costs involved, and leave room for unexpected expenses–experts recommend building in a 10 percent cushion.

Determining Your Budget

Once you have a good understanding of the general scope of home construction costs, you can begin thinking about your budget. There are several ways to figure out how much you can spend on your home, but one helpful strategy is to determine what kind of monthly mortgage payment you can afford, and then work backward from that number to develop your home-building budget.

One reason you’ll want to develop a clear budget is because you’ll likely need these numbers before a bank will grant you a construction loan. If you are struggling to determine costs and develop a budget, working with an architect can be helpful. He can help you find ways to save money and still get the home of your dreams.