Hard Costs
Direct definition
Direct construction costs — materials, labor, and site work — used to build the physical structure.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Hard costs include foundation, framing, HVAC, roofing, and finishes. They usually make up the majority of a construction budget.
Why it matters
Hard-cost overruns are common and drive the need for a contingency reserve.
Where you may see it
- Construction budget
- Construction loan agreement
A real-world example
On a $500,000 build, hard costs might total $400,000 with the remainder split between soft costs and contingency.
Educational and illustrative only
A common misunderstanding
Hard costs don't cover permits, design fees, or financing charges — those fall under soft costs.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026