Congrats, Jackfruit. I only see a few things that may be a problem. You need to check out the lots and find out how much more dredging, leveling, access, tree-pulling, etc. is going to be needed before the house can be built. I don't know of too many custom builders that will build a 2000 sq. ft. home. I'm sure they will, but it's not common for a house that small. Is this a 1/4 acre lot?
That seems extremely low to me. I work in architecture and $100 / sq. ft these days is considered very low. I haven't done a residential project in Houston though so maybe costs are lower there.
In my neighborhood (near the Heights), a guy has torn down and built houses on three lots. His name is Chris Bolio and does the architecture and building of the homes. I asked him casually how much it would cost to build one of these homes (they look like nice two-story brick homes)... he said it depends on how much finishing you want, but generally it's about $80 to $85 per sq. ft. If you'd like, I can provide you with his contact info and you can give him a call (at worst, you could decide not to use him).
I think it may be in your best interest to either pony up and build a bigger home or not get one at all. You have to think about it this way...when you eventually sell this house in the future, how much of a demand do you think you'll find for a 2000 sq ft home? I know you arent buying this for investment purposes, but you have to build a product that will be in demand when the time comes to sell. You may as well do something so that the return you make will be maximized.
Online estimator... decent ballpark numbers and it asks some questions you may not have thought about... http://www.building-cost.net/CornersType.asp
