When and How Much $$ Do I need for a New Build?

While we are waiting for the builder to break ground in a week or so, we have glossed over something that may be very important to anyone thinking about building with Toll Brothers or possibly any other big builder.

HOW MUCH MONEY DO I NEED BEFORE THE HOME IS ACTUALLY BUILT???

Well, for us, we had to put down money multiple times throughout the process from the time we put a deposit on the lot we wanted…If you have questions about this, please send  us a message at the bottom…

FIRST THINGS FIRST:  Toll Brothers makes you qualify with their mortgage company before they will start any negotiations on a contract.  You do not have to use their mortgage company when you close, but they want to know that if where you go falls thru, you are good with their team.  Before you step foot in any design center or think of other options you want in the house (additional structure, upgraded granite/flooring, home audio/video or landscaping), they will KNOW how flexible or tight your budget is going in.  Ok, now that you know Toll Brothers won’t let you go over your loan amount…

1st Down Payment:  We put the minimum amount down to reserve the lot we were going to build on.  For our neighborhood, this amount was $5,000.  We had no premium on our lot, but it is a large .5 acre corner lot that we liked a lot compared to a few wooded lots with premiums.  For our lot, you end up paying (potentially) more for the house because it is a requirement to have brick siding for corner lots.  We wanted brick and a nice sized lot for our children to go outside aka get out of the house :).  This deposit was refundable and gave us a chance to go over the initial contract with Toll Brothers before we signed anything. If you have a realtor, this is where they are worth their weight in gold. This is where you negotiate upgrades, incentives, down payment assistance, etc.  

Initial Contract Signing:  Once we decided on all of our structural options (i.e. expanded kitchen, expanded family room, additional rooms in the basement, or any other physical add-ons, we had another couple of deposits to make.  Because I am military, I was able to make a 3.5% deposit on the BASE PRICE vs a 5% deposit on the BASE PRICE for conventional loans.  So for simplicity sake:

VA Loan: $600,000 base price x .035 = $21,000 deposit (the lot premium will be part of the base price)

Conventional Loan: $600,000 base price x .05 = $30,000 (the lot premium will be part of the base price)

The 2nd deposit that has to be made to Toll Brothers at this time is the deposit for any of the structural options I talked about when signing the initial contract.  For VA loans it is still 3.5%, but for conventional loans it jumps to 20%.

Here’s an example:

  • Finished Lower Level:  $22,500
  • Expanded Family Room: $9,500
  • Home office for finished lower level: $4,800
  • Total structural additions: $36,800
  • deposit amount VA Loan: $36,800 x .035 = $1,288 
  • deposit amount Conventional Loan: $36,800 x .20 = $7,360

** structural additions are typically higher and they were for us too, but this is just an example to show the 3.5% deposit for structural add-ons.  From what I’ve seen, its anywhere between $0-$150,000+.  Just remember, things add up very fast, lol.

Design Center:  This is where allllllllll the goodies are.  If you are going with Toll Brothers, I suggest you go to the design center about 3 or 4 times before your scheduled 3 hour appointment.  As you saw in our other blog, this is where you pick all your flooring, cabinets, carpet, granite, faucets, cabinet hardware, lighting, etc.  It can be a tad bit overwhelming if you don’t compartmentalize and have a BUDGET before going in.  Any design center addition that you have will be an additional 3.5% deposit for VA loan and 20% for conventional loans.  Here, we stayed under $70k but as I’ve noticed going around to different houses being built, we were probably more on the high end.  So we had another deposit ~$2,500.

Other:  There are other things to consider when strategizing the budget for your house.  These two things, I wish Toll Brothers, would explain upfront.  I’ve mentioned it to them, so hopefully it helps future homebuyers out there to plan well ahead of what things they could actually have in their loan vs spending their cash after closing.  These two things are HOME AUDIO and LANDSCAPING.  We wanted whole home audio and video along with a movie theater package that I wouldn’t necessarily want to spend cash on after closing.  Deposit again on this is 3.5% for VA loans and 20% for conventional loans.  You kind of get the drift of how much you have to put down by now I hope.  For the landscaping, we wanted a deck, patio, grill station so we could be able to entertain as soon as we move in.  With the prices Toll Brothers had, we stuck with the patio and grill station, as the price for the deck was not in line with what we wanted to use on the backyard in our mortgage.

Bottom Line:  With all that said, bottom line is you CAN’T wait until you first sign a contract to start saving money.  You must do this ahead of time because you will have to put deposits down as they are planning to build your home.  Once the home is built, you have essentially put down the majority of your downpayment.

If you have any questions at all, please feel free to leave a comment/question below!

~ Rod

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