6 Min Read | Sep 24, 2021

Who doesn't love getting something brand-new—especially if information technology's custom-made just for you? The problem is, custom-made things tend to come with higher price tags and longer delivery times—which are important factors in deciding whether you should purchase or build a house.

A business firm is way likewise large of a financial responsibility to make a wrong choice hither. To aid you lot land the best decision for you and your budget, nosotros bankrupt down the pros and cons of edifice a business firm.

Allow's check them out!

Is Information technology Cheaper to Buy or Build a House?

In 2020, the average cost to build a business firm was over $485,000.1 Meanwhile, the average cost to purchase an existing single-family domicile was well-nigh $309,000.two That ways choosing to purchase a pre-existing house instead of building a new one could salve you lot $177,000!

And if you took the middle road and bought a new, semi-custom tract house, it'll still toll you nearly $l,000 more than a previously owned home.iii

Pros of Building a House

Okay, now that we covered pricing, let'due south wait at the specific benefits of building a house:

  • Customization. If you build a house from the ground up, you'll get to personalize the details to accommodate your lifestyle and tastes—from the layout, cabinets and flooring to the sinks, lighting, paint colors and doorknobs! Even tract homes congenital within subdivisions let for some customization in color choices, floor options and certain finishes.
  • Low to no competition. Information technology might come as a shocker given the state of the globe over the last yr, but the 2022 real estate market is hot. In February 2021, existing homes were on the market for an boilerplate of twenty days!4 With homes flying off the market so chop-chop, competition to detect the best existing home at the everyman price can exist tough. But if you already own the land yous want to build your dwelling on, you apparently accept zero competition!
  • Lower maintenance. Since new homes are built to meet electric current building codes and take up-to-appointment technology, you probably won't have to worry nigh big repairs or heavy maintenance bug for the outset few years—pregnant no leaky roofs or declining HVAC systems! Plus, many homebuilders offer a limited warranty if something should break.
  • Lower energy costs. New homes often feature the latest energy-efficient systems and materials, which normally leads to lower energy bills—woo-hoo!
  • Newness. You go to starting time fresh as the first owner of your home and relish brand-spanking-new systems, finishes and fixtures.

Cons of Building a House

Okay, we already know one disadvantage of building a firm is that it's more expensive—which isn't so bad if you're able to budget for it. But now let's consider all the other cons of building a house simply to cover our bases:

  • Longer await time. It takes an average of seven months to construct a new house—non counting the planning and approval stages.5 This means you'll likely have a gap in living arrangements betwixt the time you sell your old identify and build your new one. Then you'll need to be prepared to cover the cost of renting until you lot tin motion into your newly built firm.

  • Harder to negotiate toll. Most buyers become into a habitation buy hoping to lower the price. While that's super mutual in the resale market, new homes are a little different. Usually in that location isn't a lot of elbowroom on closing costs or buy price with a builder—unless your real estate agent brings a creative heed to the negotiation table. Withal, you lot'd probably go more bang for your cadet with an existing home.

  • Noise and mud. If you build a firm where other new homes are being built, you might have to deal with construction noise, traffic and glops of mud along your commute. Sure, things volition somewhen calm down as other homes go completed, but information technology's something to think well-nigh if your tolerance for noise level and messiness is on the low end.

  • Stress. When you lot build a firm, y'all'll have to purchase land, determine on a home design, pick out flooring, fixtures, cabinets, countertops, interior trim, exterior trim, and on and on it goes. You'll have to do all of this and stay within your budget. Managing all the details that become along with building a dwelling takes time and effort. Don't underestimate the depth of stamina y'all'll demand to make sure it's all washed the right way.

  • Hidden costs. Those dollar signs you see on the sticker—for things like countertops, fixtures and appliances—are but the tip of the price-berg. Upgrades can quickly bulldoze up the toll of your new home and may or may not exist rolled into your contract cost. Play it safe by budgeting for only those you lot can embrace with cash. And don't forget about post-motion costs like landscaping and blinds—they'll sneak upwardly on you too.

Tips on Paying for a New Dwelling Build or Existing Home

Whether you lot build or purchase, make sure you stick to a house you lot tin actually afford. Never go a firm with a monthly payment that's more 25% of your take-habitation pay—otherwise, you'd be house poor!

Detect adept agents to help you buy your home.

That 25% limit includes principal, interest, property taxes, homeowner'southward insurance and, if your down payment is lower than 20%, private mortgage insurance (PMI). Plus, don't forget to consider homeowner'south clan (HOA) fees when preparing your upkeep—in case your new home is function of an HOA.

Use our mortgage calculator to enter your downward payment amount and endeavour out dissimilar home prices within your budget. If you want a mortgage you tin pay off fast, talk to Churchill Mortgage about getting a xv-year fixed-charge per unit conventional loan. Whatsoever other type of mortgage will drown you in interest and fees and continue you in debt for decades.

If you lot're a start-time dwelling house heir-apparent, information technology'due south probably amend to go the cheaper route and buy an existing house to make it some homeownership reps and build disinterestedness (your dwelling house'south value minus how much y'all owe on it) before you have on the challenge of building a new house.

But if yous're confident you tin can build a house while staying within that 25% limit and still handle all the other homeownership costs like maintenance and utilities, so building a house could be a fun adventure for you.

Whether you buy or build, owning a firm you can afford is an incredible way to build wealth!

Buy or Build With Confidence by Working With an Agent

The all-time way to choose whether y'all should buy or build a business firm is to talk it over with an experienced real estate agent. Your agent will know where to detect the all-time deals in long-continuing neighborhoods or in up-and-coming communities. And they'll help you decide if building a business firm or buying an existing home volition suit your needs best.

If yous want an agent who volition practise whatever it takes to assistance you find the perfect home or plot of land to build on, effort our Endorsed Local Providers (ELP) program. We simply recommend superlative agents who share our mission to serve you in crushing your fiscal goals.

Find the best real manor agents about y'all!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and heighten their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and ten podcasts, which have over 17 million weekly listeners.

Purchase a House With an Agent Who Serves, Not Sells.

You lot need an agent who cares more about you than their commission check.

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Buy a Firm With an Agent Who Serves, Not Sells.

You lot demand an amanuensis who cares more about you than their commission bank check.

Detect a Buyer's Amanuensis