1) Budget soft costs (permits/hookups/fees add 15–25%). 2) Fund the contingency (5–10% reserve + 15–20% buffer). 3) Plan a realistic timeline + interest reserve. The rest are below. See Requirements & How to Qualify.
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Budget mistakes
1. Forgetting soft costs
Permits, utility hookups, impact fees, surveys, design add 15–25% to hard costs. Budget them from day one. Model it →
2. Skipping the contingency
Change orders are the rule. Fund the 5–10% reserve and a 15–20% buffer.
3. Trusting a rough estimate
Get a fixed-price contract and a line-item budget, not a ballpark number.
4. Under-sizing the loan
Borrow for the true total cost; a loan sized to an incomplete budget runs out mid-build.
Timeline & reserve mistakes
5. Assuming the best-case schedule
Weather, permits, materials slip builds. Plan the timeline as a range.
6. No interest reserve
Carry accrues every month with no income. Set aside an interest reserve.
7. Ignoring the extension cost
Know the extension terms (+3–6 mo, ~$500–1,500) before you need them.
8. Draining cash to close
Keep reserves beyond the equity — draws release on inspection, not your calendar.
Builder & loan mistakes
9. The wrong (or cheapest) builder
Unlicensed/underinsured contractors stall funding & draws. Use a vetted, licensed builder.
10. Wrong loan structure
Two closings when a C2P would lock your perm rate and save costs. Compare all-in →
11. No takeout plan (developers)
If the finished project won't hit the DSCR/completed-value test, there's no exit. Plan it upfront.
The Don't / Do checklist
| Don't | Do |
|---|---|
| Forget soft costs | Budget +15–25% for permits/hookups/fees |
| Skip the contingency | Fund 5–10% reserve + 15–20% buffer |
| Trust a rough estimate | Get a fixed-price line-item budget |
| Under-size the loan | Borrow for true total cost |
| Assume best-case timing | Plan the timeline as a range |
| Skip the interest reserve | Set one aside for carry |
| Ignore extension terms | Know them before you need them |
| Drain cash to close | Keep reserves beyond equity |
| Pick the cheapest builder | Use a vetted, licensed, insured GC |
| Default to two closings | Compare C2P to lock the perm rate |
| Wing the takeout (developers) | Pre-plan a DSCR/perm exit |
Construction mistake FAQs
Most common mistake?
Underbudgeting — forgetting soft costs (15–25%) and the required contingency. It's the top cause of a mid-build crunch.
Do people skip the contingency?
Often — fund the 5–10% reserve and a 15–20% buffer; change orders are the rule.
Is an unrealistic timeline a problem?
Yes — every extra month adds carry. Plan a range and hold an interest reserve.
How important is the builder?
Critical — an unvetted builder stalls funding and draws. Use a licensed, insured GC with a fixed-price contract.
Reviewed by the licensing team at Save Financial, a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) founded in 2009 and serving all 58 counties from offices in Newport Beach and Marina del Rey.