Example

John and Judy Smith would like to build a Kuhns Bros. log home. They have chosen the Lewisburg model. But can their budget support the cost? Here's their completed prequalification form:

Budget Estimate:

1. LAND: -$10,000.00

$10,000.00 still owed on property

2. EQUITY: $35,000.00

$35,000 due from sale of existing home.

3. SAVINGS: $20,000.00

$20,000 from sale of stocks.

4. INCOME: $120,000.00

Combined income of $60,000 x 2
Interest rate at 9.2%.

MAXIMUM HOUSE BUDGET: $165,000.00

Project Cost:

Lewisburg Model (2,220 sq. ft.)

Square Foot Method: Multiply by $90.00 and $130.00

$199,800.00-$288,600.00

Analysis of this example:

Unless John and Judy are going to do a lot of the work themselves, the Lewisburg is too large of a home for their budget.

Suggestions for lowering the Project Cost are: reducing the size of the home, using additional savings, increasing sweat equity, or changing home style to one where the square footage is more evenly spaced between two floors, roof system changes, use of drywall...

As you can see, calculating this information is a great way to determine how much home you can afford...before you get too involved in the planning of your ideal dream home.