If you’re in the market for a home, you may be tempted by the thought of having a custom home built just for you. Similarly, you may be thinking of buying an existing home in an established neighborhood. So, which is better—buying or building?
The highlights:
- Deciding whether to build or buy depends on your personal circumstances and preferences.
- Your timeline may also affect your decision, as building may take longer than buying an existing home.
- Whatever you choose, there are financing options to help get you into your dream home.
There’s no easy answer to the build vs. buy question, as both options have pros and cons. The best solution for you depends on your particular personal and financial circumstances, as well as what matters most to you and your family.
Factors to consider: Building a home
Constructing a home could the best way to ensure you and your family get exactly what you’re looking for and may be a good option if there aren’t many homes for sale in your location. But building a home might take much longer than buying an existing one and could come with a higher price tagDisclosure 1 —including any potential unexpected costs that could pop up during the process.
Pros of building a new home include:
- Customization - If you’re building a new home, you can choose everything from the floor plan to the paint colors, cabinets, and flooring—and everything will be brand new.
- Less competition - You won’t have to deal with other potential buyers wanting the same home, since you already own the land it’s being built on.
- Maintenance costs - Since your home will be brand new and built according to current building codes, you likely won’t need any major repairs or upgrades, at least for the first few years.Disclosure 2
- Energy costs - Most homes today are built with energy-efficient systems and appliances, which could mean lower energy costs.
- Increasing value - Your new home may appreciate in value over time.
Cons of building a new home include:
- Cost - Generally speaking, building a new home could cost more than buying an existing one, and you may run into additional costs—clearing and preparing the land, for instance—that you may not have anticipated.
- Timeline - It may take about a year to build a new house—or longer, depending on material supply chain issues and labor shortages. You may want to consider budgeting for your own housing costs, whether you’re renting or paying an existing mortgage, until your new home is ready to move in, in addition to construction costs.
- Negotiation - When buying an existing home, you may have some room to negotiate the sales price. With construction, you might find there is less negotiation room on construction or closing costs.
- Stress - Managing the construction process and budgeting for the finishes you want can be stressful.
Factors to consider: Buying an existing home
Buying an already-existing home can be a faster process than construction, and the total costs are generally less. That said, you may need to choose between homes currently on the market instead of designing your dream home.
Pros of buying an existing home include:
- Faster move-in - Most home sales close in 30 to 60 daysDisclosure 1, meaning you’ll be able to move in much faster than if you were building a home. However, it can take some time to find the home you want to buy.
- Lower total costs - In most situations, buying can be cheaper than building, and you may be less likely to run into any unanticipated costs. In addition, you may have more room to negotiate things like sales price and any needed repairs with the seller.
- Less stress - By buying an existing home, you won’t be managing the construction process.
- Desired location - It could be much easier to find an existing home in your desired location as opposed to building. Established neighborhoods may be less likely to have existing lots for sale.
- Resale - While an existing home may not appreciate as quickly as a custom-built home, its location and other features may positively impact long-term value.
Cons of buying an existing home include:
- More repairs - As homes age, they need maintenance and repairs—a new heating and cooling system, for instance. Issues may arise that were missed during your home inspection. If your home is older, you may need to deal with things like mold, lead paint, or asbestos tile.
- Compromise - You likely won’t find an existing home that checks all of your boxes, so it’s important to determine your priorities when it comes to a home.
- Updates - The previous owner’s tastes might not match yours, so consider budgeting for new paint or fixtures.
- Seller’s market - Depending on the conditions in your area, you could find yourself battling other potential buyers for the home, which can be stressful.Disclosure 3
Financing options: Building
If you’re building a home, you likely will get a construction loan as opposed to a conventional mortgage. These loans cover costs from land purchasing to final touches, and during the build you only pay interest on what you’ve borrowed.Disclosure 4 Some construction loans will convert to a mortgage after construction is complete.
Financing options: Buying
When buying an existing home, your mortgage options can include fixed- or adjustable-rate mortgagesDisclosure 5 and FHA loans. You’ll want to carefully review interest rates and market trends.
The best option for you
In short, there is no one-size-fits-all answer to building vs. buying—it depends on your circumstances, your budget, and the factors that matter most to you. If you want to be in an established neighborhood and are willing to compromise on features, buying a home may be best. If you have the time to wait on building your dream home and the budget to handle any surprise costs, then building may be the best option for you. No matter which approach you choose, remember your ultimate goal—finding the best home for you and your family.
