Is It Better to Buy a House or Build on Your Own Lot?

August 6, 2019

Deciding exactly what kind of house you should buy can be overwhelming for many home buyers. There are so many options when you are buying a home. We’re here to help you answer home building questions like…

Is it better to buy or build a house?
Will buying an existing home be too much work?
Is it cheaper to build? What is the cost of building a new home vs. buying a pre-existing home per square foot.
Do you build a production home and go with one of the lots in a specific neighborhood?
Do you build a home on your land using a home builder or find your own land?
Is it better to buy land or a house?
Do you buy a new plot of land and build your dream home there?
What is the difference between a mortgage loan and a construction loan?

Everyone has an opinion to share about whether you should buy or build a house. Many factors are important to consider including the cost of building, location, and time frame required. The bottom line comes down to your family’s specific needs and priorities.

Each option, buying or building, has its own pros and cons for home buyers.

Disadvantages of buying a pre-existing home:

No choices before buying the house to customize the floor plan or finishes.
No choices about which materials were used in the build process.
Compromise on things you don’t like may be necessary.
The lot and neighborhood are already set.
With an older home, there may be significant maintenance costs in the first few years or remodeling costs to get the home to meet your family’s needs.

Advantages of buying a pre-existing home:

Generally a shorter wait time to move in.
May not have home construction noise and mess in an established neighborhood.
Up-front cost may be 10-15% less than building a custom home.
See, touch, and walk through the finished product before you buy it.
Not many decisions to make, if any, about finishes and design – unless you decide to do renovations or projects on the house before you move in.

Existing homes are generally less expensive upfront, available more quickly, and may be cheaper per square foot. Sometimes you can find excellent sale prices if you are buying an existing home that has been on the market a while. Or if you find a house with an anxious owner who is ready to sell as soon as possible.

Whether it is better to buy or build a house depends on your time-frame, your budget, and your primary priorities.

If you decide to build on your own lot, you have a lot of freedom to choose the level of privacy, the location, and the features of the lot. And if you build a custom home on your lot, you have the most control over exactly what product you will get.

Disadvantages of building a custom home on your own land:

It may take some time to find the lot you want.
You may need to hire a real estate agent just like you would if you were buying a pre-existing home.
You will need to commit to spending a significant amount of time being involved in the construction process.
A custom home may cost more up front than a pre-existing or pre-owned home.
There is usually a longer wait to move in when you build a new house.
The raw land will need to be developed, and you may need to have a septic system put in, or hook up utilities, depending on your location.
It takes time to design the house or to hire someone to design the house for you.
If you think you may sell the house in the future, you may want to also consider the resell ability of the home and what may attract a future buyer.

Advantages of building a custom home on your own land:

Have the greatest freedom to choose the lot, the neighborhood, the level of privacy, and the lay of the land.
Situate the house to make the best use of natural light and air flow.
Choose the floor plan, architectural style, and make any modifications you’d like.
Your custom builder likely has floor plans you can choose from that would be less expensive than hiring an architect.
You can hire an architect to design a house specifically for you.
You can design your own house, if you so choose.
Add custom appliances to make your family’s life better like a central vacuum system.
Get unlimited choices with materials, colors, and finishes.
Build exactly what you want so that your house fits your family perfectly.
Make the home as energy efficient and green as you desire.
Make the house accessible (use universal design) for any current or future family member’s mobility issues.
Enjoy very low maintenance costs for the first ten+ years.
Expect a much lower chance of needing to renovate or remodel the home since you designed it specifically for your family’s needs.
Save money monthly on energy costs with the most up to date insulation, windows, and energy saving appliances.

The average cost to build a new home on your property may be a bit higher. It may take longer before you can move in than with an existing home. But you have full control and you can design a custom home to be exactly what your family wants and needs.

Ultimately, it comes down to your budget, your dream, your desires, and your needs.

If you need something really quickly and you don’t plan to be there long, maybe buying a pre-existing house that isn’t exactly what you want will work. Or maybe you enjoy a big project and don’t mind living in the mess while you have the home redone to better suit your needs. And maybe you don’t mind replacing systems and materials that are worn out.

But if you are ready for a long-term home and the house that will be perfectly tailored for your family now and for years to come, you may be ready to build a new home on your land.

A reputable, experienced custom home builder can be your biggest ally in this process. Choose your home builder wisely and they can help you navigate this journey well so that you get to focus on enjoying your amazing new custom home.

What is a construction loan?

With a regular mortgage loan, you apply and have a closing and then have set terms and a certain interest rate (or interest rate schedule) for 15-30 years. But you can’t get a mortgage loan for building a new house. New construction requires a construction loan.

This type of loan is a bit more difficult to get. It is a temporary loan that you take out while the house is being built. Then you switch over to a long-term mortgage loan after the building is finished.

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