Deciding on building a house or buying an existing home is a personal choice that comes with many considerations.
One of the most important considerations is the cost difference, followed by the additional time it can take to build the home of your dreams.
What's in this article?
In this article, we’ll explore the pros and cons of building a house versus buying and how you can find the right home loan no matter your decision.
Pros and cons of building a house
Building a house can be an extremely enticing prospect for future owners.
You can customize your own space from the ground up and create a home that includes every detail you’ve ever wanted.
On the other hand, building a home can be stressful, time-consuming and costly.
Let’s take a closer look at the pros and cons of building a home so you can determine whether this is the right option for you.
Pros of building a home
- No need to worry about major repairs or outdated appliances
- No homebuying competition
- Availability of the latest energy-efficient and smart-home features
- Compliance with the latest safety regulations and building codes
- Saving money in the long run on repairs and energy costs
While building your own home is a worthwhile endeavor for many, it may not be the right choice for everyone at the current stage of their lives.
Cons of building a home
- Usually longer time frame than buying with the prospect of construction delays or unexpected challenges
- Potentially higher cost to build than to buy because of added expenses for land acquisition, permits, labor and construction
- Conceivably overwhelming and stressful decisions which must be made throughout the process
- Possibility of difficulty finding the right location, especially in well-developed areas
Now that we’ve explored the pros and cons of building, let’s take a look at the benefits and drawbacks of buying an existing home on the market.
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Benefits and drawbacks of buying a home
For the right family or individual, buying a home can be a much more suitable option.
Not only can you generally move into your new home much more quickly, you can more easily find the best location for your needs.
Let’s take a look at the benefits and drawbacks of buying a home or building.
Benefits of buying a home
- Possibility of moving in right away once the purchase process is complete
- Potential of negotiating with the seller on the price of an existing home
- Opportunity to choose from a wide variety of home sizes and styles and to move into an established neighborhood near reputable schools and other amenities
- Confidence of homes which are already connected to infrastructures such as water and sewage, saving time and money
If you’re seeking a simple, straightforward homebuying process, purchasing an existing home is likely your best option.
But before you decide, let’s take a look at the drawbacks of buying a previously constructed home.
Drawbacks of buying an existing home
- May require updates or renovations, which can potentially cost thousands of dollars
- May be limited in how much they can be customized, meaning reduced features or settling on a less-than-ideal layout
- May have fewer energy-efficient features, meaning possibly higher utility bills
- May invite buyer competition—even for the home you want
Let’s take a closer look at the financial considerations for building a home as opposed to buying a home.
Financial considerations for building a house vs. buying
If money is no issue, then the decision to build versus buy is more about your ultimate comfort, style and location preferences.
But for most borrowers, building or buying is a matter of cost.
The cost of each can vary significantly depending on factors such as location, the cost of the land and the size of the home, but here are the major cost factors included in building a home and buying a home.
Building a home
Building a home often requires a larger upfront investment that includes the following:
- Land purchase
- Architectural design
- Construction materials
On the other hand, you also may save a significant amount of money in the long run on maintenance and utility bills because your brand-new home is up-to-date and should not require any renovations for several years.
Buyers usually have to acquire a construction loan to cover these initial costs, and then apply for a permanent source of financing once construction is complete.
Compass Mortgage offers a one-time close construction loan that combines both processes into one for a single transaction and closing.
Buying a home
Buying an existing home is fairly straightforward as far as costs are concerned.
Consider the following costs involved in purchasing a home:
- Purchase price
- Mortgage closing costs and fees (usually equaling 2-4% of the loan total)
- Maintenance and repairs
Your closing costs and fees will be disclosed to you during the loan process, so there will be no surprises at the closing table.
Should I build or buy my next home?
Whether you’re interested in building or buying your next house, the first step in the process is to talk to a mortgage lender and apply for pre-approval.
Pre-approval serves multiple purposes, including helping you see which loan options are available to you and the loan amount for which you qualify.
Compass Mortgage takes pre-approval a step further by allowing you to lock in your interest rate and Get Committed® with a fully underwritten loan commitment.
With standard pre-approvals, you haven’t secured a loan yet.
Compass Mortgage’s distinctive Get Committed® program provides a fully underwritten loan commitment that allows borrowers to go through most of the steps in the loan process—even before making an offer on a property.
A loan commitment essentially has the power of a cash offer, showing the seller you’re fully approved financially and that your deal isn’t likely to fall through.
Access your full range of loan options, including our one-time close construction loan, conventional purchase, FHA and others.
Photo by Tima Miroshnichenko