When To Buy vs. When To Build A House

When To Buy vs. When To Build A House

If you’re thinking of making the leap into homeownership, congratulations! Shopping for and buying your first home is one of the most exciting things you can do.

Truth be told, it’s also one of the most nerve-wracking. The sheer amount of decisions you need to make can feel incredibly overwhelming, and you definitely don’t want to make a major mistake. It’s a good idea to take your time and weigh your options before diving into anything permanent – and expensive.

One of the biggest decisions to make first? Deciding whether you will buy an existing home or build a new one. There are several important factors to consider, and what’s right for you is a highly personal choice. To help you weigh your options, here are some of the pros and cons of buying versus building a home that you should consider carefully:

Buying a Home

Buying a home is a big investment, and it requires spending time shopping around to chose a neighborhood, floor plan, lot and school district that you love.

On the plus side, buying an existing home is typically more affordable than building one from scratch. According to data compiled by the National Association of Home Builders, buying an existing home cost the average American about 27 percent less than new construction in 2014.

It’s also usually easier for buyers to secure financing through traditional mortgage programs than via a construction loan. This is especially true for first-time buyers, who can get some help with lower down payments through a program like Fannie Mae. A construction loan, on the other hand, is hard to get without collateral, and without already being a homeowner, you may not have enough assets in your name to appeal to a bank as a good risk.

Buying an existing home is also a good choice if you are interested in a lifestyle that allows you to walk to school, work and other community activities – as many millennial buyers have proven to be. New construction within an urban center or even a small town is rare, since most lots have already been spoken for. If there’s a neighborhood you love, buying a home and moving right in is a much quicker process than building a new house – just sign on the dotted line and pull up in the moving van.

Building a Home

If you remain undaunted by the process of securing financing for new construction, building a new home to your exact specifications has its benefits.

Above all else, building a new home allows you to exercise an incredible amount of control over your future living space. You get to choose absolutely everything about the house, from the color of the shutters to the size and shape of the tiles on your kitchen backsplash. If you want an open floor plan, you don’t have to settle for a home with small rooms. Want tons of windows? You can do that, too. If you have highly specific needs – for example, wheelchair-accessibility or a light-filled art studio – building a home may be the only way to get exactly what you want.

Building a home also allows you to make many eco-friendly choices in construction materials and techniques to invest in a tiny carbon footprint for the future. You can seek out LEED certification, invest in solar panels and insulate your new house within an inch of its life to keep energy costs ultra-low. You can also wire up your house with all kinds of smart devices and add as many custom touches as you like – just don’t be surprised if you suffer a bit of decision fatigue after a while!

Buyer, Know Thyself

At the end of the day, your lifestyle and personality will drive your decision about whether to build or buy a home. If you’re not in a hurry and would rather get exactly what your want, building could be for you: You may have to save up your cash for longer, and it will definitely take some time to get the house built, but you could end up with the house of your dreams. If you’d rather move in yesterday and start loving life in a neighborhood near the office, buying makes more sense.

Whatever you choose, take the time to shop around and do your research so you can be confident in your decision.

About Anum Yoon

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere. Catch her updates on Twitter @anumyoon!

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