Is Building Your Own Home Right for You?

Finding the right home in today's housing market can be tough, but is building your own home a good idea? Learn about the pros and cons of building versus buying.

The process of buying a home can be challenging at the best of times, particularly for first-time homebuyers. But in today's competitive housing market, finding the right home in the right location at the right price could feel downright impossible.

The combination of low housing inventory and increased demand has left many prospective homeowners exploring the possibility of building their dream home. But is now a good time to build a house?

The pros and cons

Building your own home may offer many benefits, but there are a few significant factors that may impact your decision, including your budget, location, timeline and goals. Weighing the pros and cons of building a house might help you determine the right path forward.

Pro: Get the right home in the right location.

The state of the housing market in your city or town may affect your decision to build or buy. If there's plenty of available land and your dream home simply doesn't exist in your preferred community, then building a home may be a good solution.

Con: Land availability may be a challenge.

On the contrary, some areas of the country may have little land available for development, and parcels that are available may be expensive. Plus, if you live in a densely populated area, you may find yourself competing against property developers for available land. If you're struggling to find available land, consider broadening your search to new locations that meet your criteria.

Pro: A new home typically has lower maintenance costs.

While a new home may cost more upfront, it's typically more cost-effective when it comes to repairs. Older homes normally require more maintenance, such as updating HVAC, plumbing and electrical systems, as well as replacing windows and repairing the roof, driveway, or siding. If you purchase a home that hasn't been maintained, these expenses may add up fast.

Con: Low-grade workmanship may cost you.

If you choose to build your own home, working with reputable, fully licensed professionals is essential. Cheaper doesn't always mean better, and a poorly built home may degrade fast, costing you more money in the long run. When hiring professionals, conducting thorough research is key to making an informed decision. Verifying licenses, reading reviews, checking for formal complaints and asking plenty of questions are a few things to consider.

Pro: Choose your own modern amenities.

While modern features can be added to older homes, doing so may be costly and challenging, and certain upgrades might not be possible. If modern amenities are high on your dream list, then building your own home may be the right choice.

Con: New neighborhoods take time to evolve.

Older homes are generally located in mature neighborhoods with sidewalks, shady trees and a built-in sense of community. If you choose to build in a developing neighborhood, you may need patience while it evolves into a community. To get the best of both worlds, consider purchasing an empty lot in a well-established community.

Pro: Customize your new home to fit your lifestyle.

When building your own home, you may have greater input into the design process, which is helpful if you have specific lifestyle needs. Universal design, an in-law suite or a first-floor master bedroom are features that might be hard to find in older homes. If you run a business from home, for example, you might draw plans for a private office area. Or, if you love to cook, you might customize the kitchen to accommodate your hobby.

Con: Personalizing may impact cost, timeline and resale value.

When building your own home, the customization options may add to the overall cost and extend your timeline. Also, if you choose to personalize your home, consider the potential impact on resale value. For example, devoting an entire floor to a huge master bedroom with an attached spa-style bathroom may be your dream. However, these features could complicate selling your home to buyers who need additional bedrooms to accommodate a growing family.

How long does it take to build a house?

If you're thinking of building your own home, one of the most important factors is timing. Building a home is a multi-step process that may take months. In 2022, the average construction time for a contractor-built, single-family home was just over 10 months from start to finish, according to the US Census Bureau.

Before you build, find and purchase land and begin the home design process. After approving the design, the next phases are permitting and construction, which is often dependent on other vendors and subcontractors. Commit to active involvement in the process because the builder may require your input along the way. The entire operation is time-consuming and may not be right for everyone.

Simply put, if you're on a tight timeline or don't have the capacity to oversee the building process, building a home might not be the best option for you.

Is it cheaper to buy or build a house?

When deciding between building a house versus buying, cost is a significant factor to consider. While the exact comparison varies based on a few factors, on a cost-per-square-foot basis, building is typically more expensive than buying an existing home.

The first factor to consider is the cost of land in your desired area. If you already own a parcel of land, you may find the cost of building a home similar to buying one—or even slightly more affordable. On the flip side, if land availability is tight, then it may be cheaper for you to buy an existing home.

Customization of a newly built home often increases the final cost. When building a home, opting out of upgrades like a finished basement or premier features may save you some money.

How does financing work when building a home?

When it comes to financing a custom home, there are several options available, including home construction loans and conventional mortgages.

If you don't already own property, you may purchase land separately or have it rolled into what's known as a construction-to-permanent loan. Construction loans are released in stages as you build your home. The lender releases money for the next stage only after the successful completion and inspection of each defined step.

These construction loans may give you the option to make interest-only payments during the construction phase. Upon completion of the home, the construction loan would convert to a conventional mortgage.

As you explore financing options, you may have questions. Use our guide to home construction loans and glossary of common mortgage terms to find some clarity.

What are the first steps in building a home?

If you decide to proceed with building your own home, one of the most important keys to success is consulting with reputable professionals for guidance.

Custom builders can likely help you work within your budget to build a home that best meets your needs. Research builders in your area and view their completed projects to get an idea of how they might help you. Likewise, talk to an experienced lender early in the process to learn as much as possible. A mortgage lender specializing in construction loans is a resource for navigating the financing process.