Let's compare the prices.
Average cost to build a home is $379,000 without the land plot price.
Average cost to buy a house is $416,900.
Let's dig into building a home.
There is not much gap between buying a building plus the price of the land. You must take into consideration the location, timeline, materials, labor and more if you plan to build. With construction costs, you could save some money by doing some of the work yourself (if you’re comfortable with it). After looking into location price differences, size of the home, quality, materials, etc., you still need to plan on overruns. Building in 5%-10% contingency for unexpected costs, will help take care of any overruns, and help with any unneeded stress. Now for the big one, the financing plan. Some people use a mortgage to buy the land and then use savings or a construction loan to fund the project. But then, when the work is finished, you’ll usually have to refinance the mortgage to repay the bank or replenish your savings. And that means two sets of closing costs: one for the original land purchase loan and another for the refinance. An alternative is to get a construction-to-permanent loan. With one of these, you borrow using a single loan to buy the land and build the home. And money is released as you reach preset construction milestones.
Let’s take a look at buying a home.
First looking at location, there can be great differences in median sales price from state to state and even county to county. Doing your research will greatly benefit you here. Next look at home price inflation, because prices in October 2021 were 18% higher than they were in October 2020. This varies from state to state but depending on whether you are a first-time home buyer, or this is your 3rd home, inflation can affect your decision in different ways. There are still lots that go into buying or building, but getting estimates and pre-approvals are going to be a great way to get started in researching whether you should buy or build.