It is easy to take all of the fun out of building a home by looking at homes and features that are “out of budget.” A quick meeting with your local bank loan agent should give you a general idea of how much you can afford to spend on the new house.
Make sure you factor in maintenance and utilities. Building a low maintenance, efficient house may allow you to spend more on things that make life better every day.
If you are lucky enough to live in a place where a nice 2,500 square foot existing house can be bought for under $200,000, assume that your cost to build will start around $80 per square foot. This is for the building only, land costs are additional.
Of course, many decisions will raise the price per square foot. To lower the price you have to simplify the design, choose less expensive finishes (windows, doors, hardware, cabinets …), do some of the work yourself, or all three.