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Is It Better To Build or Buy a House?

Whether you buy existing construction or build a brand-new home, any homebuying process will have its share of elations and disappointments.

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By Amy Fontinelle

Written by

Amy Fontinelle

Writer

Amy Fontinelle is a personal finance journalist with work featured in Forbes Advisor, The Motley Fool, Investopedia, International Business Times, MassMutual, and more.

Edited by Reina Marszalek

Written by

Reina Marszalek

Senior editor

Reina is a senior mortgage editor at Credible and Fox Money.

Updated February 14, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances.

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You’re ready for a change, and you want to own your home. You could buy an existing home — but your friends constructed their home, and you’re wondering if you should, too. Is it better to build a home or buy one?

When some people think of buying a home, they envision themselves as the stars of a home improvement television program: knocking down walls, moving plumbing, installing energy-efficient heat pumps, and refinishing craftsman flooring.

Other people see themselves touring model homes, poring over blueprints, and choosing between quartz and marble countertops in their open kitchens and 3.5 bathrooms.

Beyond your visions of home ownership lie the realities. Here are some things to consider when you’re trying to decide between buying an existing home or building your own.

Is it better to build or buy a house?

There’s no one-size-fits-all answer to whether it’s better to build or buy a house. It depends on what you’re looking for and what’s available in your target neighborhood.

If location is your main criterion, the decision may be made for you. Some places have little or no new construction. All the residential land has been developed. You’ll have to buy existing construction, tear something down and rebuild, or live somewhere else.

Some places have no existing construction. Developers are building new communities from scratch. You have to decide whether you believe in their vision and investigate their reputation for quality and safety.

Other places have plenty of existing construction — and it’s old, run-down, and in unsafe neighborhoods with poor schools and no grocery stores. You’ll have to be a pioneer of revitalization (or gentrification), with the vision and patience to oversee a renovation and integrate yourself into a community that may not want you there — or to build a community that may not exist.

Learn more: What Is a Down Payment and How Does It Work?

Pros and cons of building a house

Many people love the idea of living in a brand-new home where no one has ever sudsed up in their bathtub or tracked pollen across the carpet. New construction definitely has its benefits, but there are drawbacks, too. Don’t let anyone tell you whether it’s smarter to build or buy a house; consider the pros and cons and decide for yourself.

Pros
Cons
Can choose your own floor plan
In a new housing tract, properties may look nearly identical
Everything about the home is brand new
Off-gassing from new construction materials creates indoor air pollution that can be smelly, irritating, or toxic
Opportunity to customize finishes
Builder-grade materials can be unattractive and low quality, and upgrades cost extra
Should be low maintenance for many years
Often lacks fencing and window coverings, so you’ll need to pay more for privacy
Neighborhood infrastructure may be brand new
Financing is more complicated
May be more energy efficient
Lots of decisions to make
Neighborhood character may be a blank canvas
Often lacks mature landscaping
May incorporate the latest smart home technology
New construction can have defects that cause major headaches
May be closer to nature
May be in a more remote area that’s further from workplaces, restaurants and shopping, or in the wildfire-prone wildland-urban interface
Total customization may be possible, depending on zoning laws and your budget
You may not have the budget or flexibility to realize your vision in a suitable location

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Pros and cons of buying a house

Buying existing construction also has its benefits and drawbacks when compared to new construction. You’re not necessarily inheriting someone else’s problems; you might be getting a home with historical features that are too expensive for most builders to offer today.

Pros
Cons
May be recently renovated and move-in ready
May require repairs
Simpler mortgage process
Won’t be customized to your tastes or needs
Move in sooner
May need more maintenance
May have mature landscaping (e.g., large trees)
May not be energy efficient
May have features that aren’t available or affordable in new construction
May require upgrades or renovations to meet modern standards of comfort and safety
Neighborhood character is a known quantity
Neighborhood infrastructure may not be in good condition
May be in a more convenient location for work or play (e.g., close to downtown or established commercial districts)
May not be in a good school district
May offer greater freedom to customize the property
May not have deed restrictions or a homeowners association that help maintain uniformly high property standards

Buying vs. building a house

When you’re deciding between the two, you’ll want to understand the costs associated with each option and see what makes the most sense for you. Is it cheaper to buy or build a house? It depends on what you’re looking for and what’s available in the place where you’d like to live.

Buy
Build
Delayed move-in
Problematic inspections
Construction delays
Additional expenses
Renovations
Upgrades
Mortgages
One mortgage loan for long-term financing
Might require separate loans for construction and long-term financing
Repair costs
End-of-life repairs, some of which may be hidden; mandatory environmental upgrades to meet the latest standards
Construction defects

Which option is cheaper?

The national median sale price of a new home was $434,700 in November 2023 according to the U.S. Census Bureau. The median sale price of an existing home was $387,600 according to the National Association of Realtors.

Several circumstances will impact your final price tag:

  • Customization: If you’re buying new construction, will you be hiring an architect to create a custom build? Will you be choosing from one of several tract home floor plans, then selecting your own finishes from limited options? Choosing your own custom details will likely come at a higher cost.
  • Infrastructure: If you’re building in a remote location or a largely abandoned central city neighborhood, you might incur substantial costs to connect your home to water, sewer, and electrical utilities. Broadband internet may be unavailable.
  • Financing: If you buy an existing home, you can lock in your interest rate for 30 years at today’s rates (or whatever rates are when you find the right home to buy). If you buy a new home, you may not be able to guarantee your long-term rate up front. If interest rates rise and your rate lock expires before construction is complete, the home you just built could become unaffordable. It may be possible, however, to lock in a long-term rate when you get your construction loan.
  • Timeline: What do the supply and demand for existing homes look like in the place where you want to live? How does that compare to the supply and demand for new construction? Think about what you’ll spend and what hassles you’ll encounter in the time between deciding to move and finding or building your next home.

Better to build or buy a house FAQ

What is the most costly part of building a house?

It depends on where you’re building. In some places, the most costly part may be purchasing the land. In other areas, it may be the labor or the materials. It depends on the local economy as well as broader economic conditions.

Is it harder to get approved for a loan to build a house?

It’s not necessarily harder to get approved for a loan to build a house, but it can be more complicated. Many builders work with preferred lenders who offer convenient financing. That said, it’s still a good idea to shop around and get quotes from multiple lenders. Don’t assume that the lender the builder wants you to use is the most cost-effective option; construction loans are available from multiple sources.

How can I tell if I can build on a property?

You’ll need to request information from the local government to find out whether local zoning codes allow residential construction on the land where you want to build. If they do, you’ll need to find out what restrictions apply, such as how far the home must be from the road and from neighboring properties, how tall the home can be, and how big of a footprint the home can have on the land.

What inspections will I need to build a house?

The inspections you’ll need to build a house will depend on what your local building safety code requires. A local building inspector, typically a government employee with experience in construction or general contracting, will likely visit the building site at various stages in its development to sign off on key components such as plumbing, electrical, and the heating, ventilation, and cooling system. The inspector will also need to visit once everything is complete to issue an occupancy permit.

Are there special loans for building a house?

Yes. If you want to build a home, you can take out a construction loan to finance the building phase. You can then get a purchase mortgage once construction is complete. Another option is to get a construction-to-permanent loan.

Meet the expert:
Amy Fontinelle

Amy Fontinelle is a personal finance journalist with work featured in Forbes Advisor, The Motley Fool, Investopedia, International Business Times, MassMutual, and more.