Show me the money

Many people have no idea how you go about funding a project like this or how important the budget is before you even start. I am not an expert or particularly good at finances. Paul handles most of our personal accounts and before we were married I totally sucked at finances. That said, I do manage discretionary items for our clients at Hawthorn - basically almost everything that has to be ordered. And we keep very accurate historical data on past projects. This knowledge was the basis for creating our budget.

After we made and had an accepted offer on the property, I sent over a preliminary budget to Needham Bank, our Lender. We chose Needham Bank because they have a lot of experience with these types of projects. After they received the first budget, they conduct an appraisal. Your house purchase price plus construction loan amount must total 80% of its future value (some banks only require 90%). In our case, the assessed future value was 510k. So based on the purchase price this left 140k in a construction loan. My original budget was 190k. I’m sure you can do that math - this basically means we are doing more work ourselves. Which is fun and totally fine with us.

Another item you may not know is you don’t get reimbursed for stuff until it’s done. Meaning if you have 15k budgeted for windows, the Bank doesn’t give you that money until those windows are installed. Some construction companies bill in arrears, so you don’t have to front the money, but there is almost always going to be a situation when you have to float a large sum of money. Something that is also super important to know is you only get paid from the bank for the budgeted amount. If those windows actually cost 17k instead of 15k, you are still only getting 15k. You will have to come out of pocket for the difference. It took three paragraphs to cover the broad strokes of the finances. You can imagine how this part of the project might be really stressful!