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.
CALCULATOR: How Much House Can I Afford?
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 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 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.
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.
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, and 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 upfront. 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, heating, ventilation, and cooling systems. 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.
