What to Know Before Building a Custom Home

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7 Key Things To Consider Before Building A Custom Home

Thinking about building a home or building a custom home for the first time? It’s a huge decision that will have an impact on your life for years to come. It’s only natural you’d want to research and be well-informed about what you may be getting into before you decide to build a home for the first time. As an affordable custom home builder in Idaho, we’ve worked with many first-time home builders and we’ve previously covered the pros & cons of building vs buying a house, which you may also find beneficial. 

Today, we’ll help you understand what to know before building a custom home to help give you the right expectations about the home building process if you’ve never been through it before. These are our top things to know before building a custom home. 

  1. Understand Financing
  2. Know Your Budget
  3. Determine What You Want & Need In A New Home
  4. Research Your Lot & Location
  5. Your Home Builder Makes ALL The Difference
  6. Understand What Is Included In Your Bid
  7. Communication Is Key

Understand Financing For A Custom Home Build

The very first thing you’ll want to know before building a custom home is how financing a custom home works. Financing a home build is different from how you’d traditionally finance a home purchase. How you finance a custom home build will factor into your home building budget, which will ultimately impact your entire build and your decision to build. We’ve covered the fundamentals of financing a custom home build in detail before, so we’ll give you a summary here.

Financing a custom home will be different if you already own your land or if you will be financing your land purchase too. If you don’t yet own your lot, you’ll need a land loan first. A few things you want to know about a land loan compared with a traditional mortgage: 

  • Typically requires a larger down payment (20-30%) 
  • May come with higher interest rates
  • Likely has a shorter loan term

If you already own your land or once you’ve financed your land purchase, you’ll need a construction loan to finance your home build. We also have a comprehensive guide to construction loans to help you fully understand construction loans, but here are the essentials. 

Construction loans differ from traditional mortgages in that they have different payout and different payment schedules.

  • Construction loans are paid out in installments during construction
  • Payments you make on your loan during construction will only be for the loan interest
  • Interest rates on construction loans are variable
  • The full loan amount is due once your custom home is built

There are also different types of construction loans. Some lenders have what’s known as a construction to permanent loan, which automatically converts your construction loan into a traditional mortgage upon completion of your custom home build. The other option is a standard construction loan and then securing a separate traditional mortgage after your custom home is built. There are advantages and disadvantages to both options. You can learn more about these in our guide to construction loans.

Know Your Home Building Budget

Once you know how financing works, the next thing you want to know before building a custom home is your budget. If you go into the process with an unrealistic budget, you’ll be setting yourself up for disaster. So before you start designing your dream home, determine how much you can realistically afford. This will help you as you think about what you want and need in a new home and as you talk with potential builders to help you build your custom home.

To determine your budget you may want to talk with a few different lenders to be able to compare potential rates and costs. The checks on your credit history should count as one inquiry as long as they happen within a set period of time.

When budgeting for a custom home build, you’ll want to factor in a contingency budget. With any custom home build, there can be unforeseeable circumstances and hidden costs of building a custom home that you wouldn’t know you’d need to include at the start of your project. This is what your contingency budget is for. We recommend a minimum contingency budget of 5% of your initial cost for a custom home build.

If you factor this into your budget at the start, you’ll be setting yourself up for success should any additional costs arise during your home build. As much as you plan in advance and research what you want in a custom home, you may also find there are small changes or upgrades you’d like to make during the build. These little changes and updates can add up so planning a contingency budget from the start ensures you are financially prepared for your build. 

As you are budgeting you may also find it beneficial to understand what you can do to save money building a custom home.

Determine What You Want & Need 

Determining what you want and need in your new home before you decide to build a custom home is essential. It can also be a little overwhelming. Here are a few things to know before building a custom home. Keep in mind that even if you don’t plan on your newly built home as your forever home, you’ll likely be living in your new home for several years, so try to consider both what you want and need now and what you may want and need in the next 5-10 years. Here are a few things to think about before building a custom home:

  • Who will be living in your new home? Will you have a multigenerational household? (Get tips on multigenerational home building here.)
  • What rooms do you want in your new home and how will you use them? Consider multifunctional rooms for better future-proofing.
  • What do you want in your outdoor living space? Usable outdoor space is one of our top homebuilding trends in 2024.
  • Where do you want to live? Is proximity to outdoor recreation, amenities like grocery stores and restaurants, or schools important to you?
  • What style of home do you want? Are you looking for a modern farmhouse plan? Craftsman? A ranch style house plan?
  • What features are important to you in a new home? Do you prefer high ceilings versus a standard ceiling height? Do you want a fireplace? 
  • Do you have requirements for amenities like electrical outlets in the closet, pre-wiring for smart home technology, and hose bibs on each side of your home?
  • How much storage space do you need? Do you want additional garage storage space?
  • Is it important to you to build an energy efficient home?
  • Will you want additional buildings on your land? A shop? A shed? An ADU?
architect designing home

Considering what you want and need in a new home will help you determine if building versus buying is right for you, if you know what you want before building a custom home it will help you choose your lot, make it easier to communicate with your future builder, and likely save you money. 

Research Your Lot & Location

If you are looking to build a home on land you already own, you may have already gone through the process of researching your land and understanding the building & permitting requirements for your home. 

However, if you haven’t yet purchased land, you’ll want to do full due diligence on any property you’d like to build on to make sure that you understand what you are working with. If you take the time to do your research you’ll know what you are getting and you can avoid future headaches and save money. Land preparation costs can be expensive, so it is worth it to do your research and know what you’ll need to budget for land preparation and special construction requirements before building on your land. Here are a few examples of what you’ll want to consider: 

  • The history of the property: Find out how the land was previously used so you’ll know about anything potentially hazardous or unwanted, i.e. was it previously a landfill? Was it used for anything which would make it potentially hazardous?
  • Flood zones & water tables: You don’t want to buy a piece of land only to find out you’ll need to spend thousands on infill because of the height of the water table. Similarly, understanding if your land is in a flood zone may sway your decision on purchasing and how and where to build on your property.
  • Typography: The typography of your property can make it more or less difficult to build on. Generally, a flatter piece of land will cost less and be easier to build on, saving you time and money on land preparation costs.
  • Soil type: If you don’t have the right soil on your land, you may be forced to pay extra to make it buildable. It’s worth finding out before you buy to make sure you have the right expectations.
  • Zoning laws: Before deciding to buy land, make sure it is zoned appropriately and that you understand laws around setbacks or the number of buildings you can have if you are considering adding multiple buildings to your property, like an ADU separate from your main residence.

[Check out these preconstruction considerations when building on your land for more details.]

Understanding the limitations, laws, and restrictions of the land you want to buy is a valuable thing to know before building a custom home on your land.

Your home builder makes a HUGE difference

Choosing the right custom home builder is probably the single most important decision you’ll make during the home building process. When choosing a builder for your custom home build, we recommend talking with and interviewing multiple builders. Ask questions and pay attention to how you feel about each builder. You can ask about their experience, the team you’ll be working with, their process, and any other questions you may have. You can also talk with them about the style of home you are looking for and ask them for examples of previous home building projects they’ve completed and referrals, so you can talk with people who have been through the process with them previously. 

We’ve worked with clients who have had bad experiences with their previous home builders when building other homes and even had clients come to us after starting a project with other builders because they were so disappointed in the process with the original builder they chose.

Taking the time to talk with home builders you are considering working with can help you avoid a bad experience like this, save you money, and be a huge asset to you as you design your new home. If you’d like more information, take a look at our top tips on how to choose a custom home builder

If you are considering building a custom home in Idaho, we’d love to talk with you about building your new home. Contact us for a free consultation or learn more about working with us

Understand What is Included in the Bids You Receive 

As you are going through the process of interviewing builders and receiving bids for your home, it is important to know that not all bids are equal. Be sure you understand what is included in your bids. 

As an affordable custom home builder in Idaho, our focus at Pathway Builders is on providing our clients with the best value for quality and price. That means our bids always include standards like higher R-value insulation, fully insulated garages, and double pane, low-E windows for greater energy efficiency, for example. However, these are not the same standards as other home builders.

Understanding what is included and what your upgrade options and add-on services are, will help you compare the bids you receive. If you aren’t sure about something, be sure to ask to save yourself headaches and stress in the future. 

Most builders have preferences and specialties that impact what they include as standard and how they normally work which are factored into your bid. If you are going outside the standard, you’ll usually pay more so be sure you review your bids to ensure that you are okay with the inclusions and you understand what you are getting with each one.

Communication is KEY

Ultimately, the number one thing you should know before building a custom home is that communication is the key to a positive experience. This goes both ways. It relates to the communication you receive from your builder, and why the builder you choose is so important to all aspects of your home building experience. 

Communication also refers to your communication with the builder. Before your home is under construction you’ll need to communicate what you need and want in your new home as well as be able to ask questions about the items that are important to you. As your home is being constructed you’ll have to respond to updates or questions from your home builder and make sure that you are communicating with your builder about any items you are responsible for. If you have any changes during construction you need to be able to communicate those to your builder. 

Overall, the better your communication with your builder and vice versa, the better your home building experience will be. 


If you’ve gone through this list of what to know before building a custom home, you are already on your way to a great home building experience. In the end, being able to dedicate time to prepare through research about your land, your financing options, and potential home builders, and knowing what you want in your custom home will improve your overall home building experience. 

If you are considering building a home in Boise or building a home in Treasure Valley, we’d love to talk with you. Contact us for a free consultation or take a look at our custom home plans and get an instant quote for the home plan you like best.