Buying A Home Vs. Building A Home: What's The Difference?

Homeownership is a huge milestone that many adults look forward to. It is an opportunity to cultivate a stable environment to raise a family. It is also a great investment that helps cultivate better financial habits and provides a lot more freedom than renting. There are even tax benefits!

It is a very arduous process, though, which is why there is never a shortage of questions surrounding obtaining a home. When should I start thinking of owning a house? What kind of house should I get? How should I pay for it? Should I renovate or rebuild? There are so many different paths to achieve the end result and every home purchase journey is different. When it comes to the question of buying or building, ask yourself what your top priorities are, suggests Insider. Time, costs, and aesthetic choices are some of the main factors that will help you make your decision. Taking these into account, here are some of the differences between buying and building a home.

What are the differences in cost?

The costs of building a home include buying and clearing the land and setting it up with everything a house needs like electricity, plumbing, windows, paint, roofs, and more. Similarly, buying a home includes a lot of logistical costs such as insurance, property taxes, fees, and the down payment, notes Bankrate. The budget for building a home can vary considerably depending on the design, however, it is generally possible to stay on the less expensive side and still get what you want. In contrast, there isn't always a lot of flexibility when it comes to buying due to the fixed costs of external fees and taxes.

Overall, it is more expensive to buy a house than to build one. According to Realtor, the current cost of building a new house is around $300k, while the cost to buy is higher at around $400k for a similar property. You are more likely to receive a loan approval for a home as opposed to a loan for land, however, so the decision often depends on your situation.

Pros and cons of buying

When you buy a home, it is a faster process to get everything arranged and get you moved in quickly. Another benefit is that you have the option to negotiate and get a better price than you had originally planned, says Graana. Is there a certain area you want to live in? Buying is a much better way to live in your desired location because you can just look for houses that are already there, per Rocket Mortgage.

There are a lot more compromises you have to be ready to make when you buy a home. It might not be to your exact taste or come with all the features you would want. It also requires more maintenance and repairs. Since the house has been lived in before, you might experience some wear and tear as time goes on and it will be your responsibility regardless of if the damage was caused by you or not.

Pros and cons of building

One great thing about building your home is that you get exactly what you want and need. You can be involved in the process and make choices that suit your preferences perfectly. This also means that everything will be brand new and you won't have to worry about major repairs and maintenance for a while. When you build, you can be sure that your home will be modern, efficient, and completely up to code, says Graana.

On the other hand, building a house is often a long, complicated process that requires patience and commitment. It isn't the best option if you need to move in and be settled quickly. Another thing to be cautious of is that costs can keep trickling in when you move. Since you are starting from scratch and can't rely on what any previous owners had, there will always be something needed.

When to choose buying over building

From getting the design plans to finishing the building, it can take around a year to complete a building project, explains Ramsey. If you can't wait that long, buying can be a faster path to getting the keys to your new home. Can you bear a lot of costs upfront? The option of buying can put your mind at rest when it comes to your spending as you'll know more or less what you are getting into from the beginning.

Is landscaping a priority for you? Buying means you can reap the benefits of the landscaping done by the previous owners. Realtor says well-situated, mature trees can add a significant amount to a property's value. Building your own home would require you to start the landscaping from scratch, which takes a lot of time and money. This can cost around $1,400 to $5,700, per Realtor.

When to choose building over buying

Did you know that a house spends an average of 22 days on the market and can close in about 49 days? These stats from US News & World Report show how fast homes sell! One clear way to stay out of these competitive bidding wars is by building your own! 

Buying land and constructing your own home can help you make sure you get value for money and also lets you take the time necessary to get the kind of house you want. This is also the reason that people prefer to build, not buy their dream home. When you build, you can be part of every step of the process and make your dream a reality.