Is it relatively cheaper to build a house instead of buying one?

Question

I am looking into buying a house, but I heard from a few sources that I should look into building instead and buying the land, then taking out a construction loan to build. Does anyone know if it is always cheaper to build instead of buy? What are some downfalls to building and vice versa?

Answer 1

A home you build of the same size and design should be cheaper. However, you will have all of the construction problems to contend with.

Answer 2

It can be, if you're prepared to do some of the work yourself, but in this housing market you could probably do better buying an existing home and maybe re-decorating a little. Do your homework on how the financing works if you build it yourself. It's not as straightforward as just getting a mortgage on an existing home. Do lots of homework, actually. Talk to builders in your area to find out what you'd pay them. One of the the downsides to building yourself is that it will take longer than you thought, and you'll be paying for someplace to live as well as the new house for a while. Also, while banks may be quite happy to give you a 25-year mortgage on an existing home, they will be very reluctant to do any long-term financing on a piece of land unless you have a huge income. So, if you can't buy the land outright in the first place, you can end up with large payments on the land until you complete the home and can apply for a regular mortgage. Even if you hire a builder, be prepared to spend a fair amount of time around the new place while it's building. If this is a first home for you, I wouldn't recommend it.

Answer 3

Only if you can do the majority of the work yourself.  Otherwise with all the homes in foreclosure, I am pretty sure you can buy cheaper.