Words, Photos, and Graphics By Marie Brown
You have highly curated boards of Pinterest and Houzz. You’ve spent countless hours binge watching HGTV. You have enough ideas to build not just one home, but an entire neighborhood of new homes. It’s time to move past the “someday” phase and start making plans to break ground and build your dream home in 2019.
Now what? There are so many decisions that go into building a new home that I’ve broken it down into two blog posts. In this post, we review your lifestyle, declare your “wants vs. needs”, define your budget, and discover why choosing your lot is more important than your floor plan.
Examine what you like and don’t like about where you are currently living. Make a list of “pros and cons”, share the list with your spouse and ask your children to make a list as well. No place will ever be 100% perfect all the time, but the goal in building a new home is to maximize your “likes”, fix your “don’t likes”, and stay within budget.
You may be surprised at what you may like and other family members don’t. Before we realized we needed to move, we spent about two years planning a remodel of our home in Madison. We loved our neighborhood, with its farmer’s market, coffee bars, and library, even a sushi restaurant, all within walking distance of home. We had a great group of friends that lived within two blocks of our driveway. The women formed a book and knitting group. The men played poker once a month. At 5:30 every weekday morning, we would meet at the corner and run a 4 mile loop on the bike path. I spent many nights rearranging the our home’s 1948 footprint, convinced I could gain another bedroom and bathroom. But for all the great things we loved about our neighborhood, the “don’t like” column couldn’t be ignored; the ever-increasing traffic and noise from a nearby intersection, a rash of robberies in cars and houses (including ours), nowhere for my kids to roam unattended, the price of remodeling, and the cost of three kids in private school. One day I looked out to see my then 5-year-old son maneuvering his bike around our postage-sized backyard and I knew we needed to spread our wings. That night my husband and I sat at the kitchen table made a list of “pros and cons” of moving. With a few lifestyle changes, we realized we could afford a much bigger home.
A year later, we moved 20 miles out of Madison into a bigger home with plenty of room to grow and breathe. Instead of running a few errands before, during, and after work, I now work longer hours fewer days per week. This new schedule opens up a weekday to cluster my errands in Madison, shopping at the same stores as I did when I lived there. We canceled the gym memberships, and now workout at home, ride the nearby mountain bike trails, and walk in a local land preserve. We eat out about once a month vs. once a week. With a bit of effort and planning, we even kept our old neighborhood friendships. They enjoy the change of pace when we invite them out to Dancing Goat Distillery or Cambridge Winery. And — this is huge –our three children attend a fantastic public school, saving on 3 private school tuitions.
Wants vs. Needs
“We must consult our means rather than our wishes.”
― George Washington
Make a running list of lifestyle wants vs. needs. Then hone, revise and repeat. This list is a bellwether of what is driving your decisions and will change over time with budget considerations. When all was said and done, what topped our list of needs? More bedrooms and bathrooms for our growing family, a two stall garage, great public schools, a small and family friendly community, nearby biking and running trails, a public indoor pool, and an overall slower pace of living.
To move past dream phase into reality you need to know how much money to save and how much to borrow. The golden rule in determining how much home you can afford is that your monthly mortgage payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out). According to Consumer Reports, financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget. However, mortgage bankers disagree. They use various calculations to figure out how much you can afford. One common measure is the debt-to-income ratio (DTI), which, for a qualified mortgage, limits your total debt payments, including your mortgage, student loans, credit cards, and auto loans, to 43 percent. Run some preliminary numbers on Quicken Loans and Rocket Mortgage to get an idea if your bank account is ready to build in 2019.
In addition to planning your projected mortgage amount, you are going to need cash for a down payment. The time tested rule for how much is the 80/20 rule; aim to put a 20 percent down payment to avoid paying mortgage insurance, leaving the other 80 percent for mortgage. This means to build $450,000 home and lot, you will mortgage $360,000, and bring a check to cover $90,000.
Location: lot before floor plan
Now that you have a budget and a list of lifestyle needs, it is time to select your lot. Here are things to consider when selecting before breaking ground:
- Where do you want to build? Are there lots available?
- Where will your children go to school?
- How long is the commute to work? How much time is spent in heavy traffic?
- Distance to stores, schools, hobbies, health care, dentist, orthodontist, places of worship? (Remember, Amazon ships everywhere)
- Busy street and highway noise?
- Where are the nearby parks and open space?
- Does the location fit your lifestyle?
A quick list I created to compare schools, commuter miles into Madison, and estimated taxes:
Define your “where to build” before “what to build”. I know that this is not the fun, glamorous, stuff of floor plans, paint chips, and countertops, but going through these steps will give you the confidence (and a budget) to move forward to the next post; Selecting a Builder.
One more thing before you go.
A huge, Wisconsin-Badger-sized-Jump-Around Thank You to the team at Brio Design Homes. I attended their “Breaking Ground with Confidence” Seminar at last weekend’s Madison Home Expo and learned so much about what goes into building a home. I highly recommend meeting up with Brio at one of their upcoming shows. They are a wealth of information and a fantastic resource as you begin the arduous/thrilling process of building a new home. Besides being great people, Brio is a group of master-builders who build custom homes, including the Madison Parade of Homes 808 Winery Way in The Vineyards at Cambridge that is for sale. If you don’t live in Wisconsin and can’t attend Brio’s seminar, here is a direct link to their video: https://youtu.be/Wqu1Pqu7M9Q . You can always reach them at (608) 437-6184. Tell them Marie Brown from The Vineyards View sent you.
Other helpful links used in this article:
Wisconsin school data 2018 State of Wisconsin Accountability Report Card: https://apps2.dpi.wi.gov/reportcards/home
“How much Mortgage can you afford?” From Consumer Reports https://www.consumerreports.org/mortgages/how-much-mortgage-can-you-afford/
Tax Mill Rate x Assessed value of home = 2018 Dane County and Jefferson County Tax Rates: http://scwmls.com/public/millrates/dane/dane_18.pdf
Property Research: Dane County Government Website: https://www.countyofdane.com/
Village of Cambridge: https://www.ci.cambridge.wi.us
Access Dane: https://accessdane.countyofdane.com/
Dane County DCIMap: https://dcimapapps.countyofdane.com/dcmapviewer/