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The decision to buy or build a house is complex, encompassing not only personal finances, but also market forces, the immediate needs of your family and your long-term plans. Before you start sketching out blueprints to build a home or begin pounding the pavement to find and buy a house, take the time to do thorough research and figure out what will work for you.
Compare the costs of buying vs. building a home
When it comes down to it, neither option is consistently more affordable than the other – it’s all dependent on the housing and building markets. When the supply of existing homes is greater than the demand, you’re likely to find the purchase route to be more affordable. But, when demand is greater than the supply and prices go up, you may be better off building a home that perfectly suits your needs rather than spending a considerable amount on a home that isn’t quite what you want.
Also, remember that the price of the home itself is not the only cost consideration in this search. If you are building a home, be sure to factor in these elements:
- Cost to purchase the land
- Building materials and permits
- Contractor and architect fees
- Rent/mortgage for your residence during construction
- Closing costs and legal fees
When purchasing an existing home, you’ll also have to pay:
- Real estate agent fees
- Renovation and repair costs, if necessary
- Closing costs
Factor in your family’s short-term and long-term needs
Money isn’t the only concern when debating whether to buy or build a house. You have to also consider which route will best serve your family’s lifestyle. For example, a busy family may not have enough time to devote to the minutiae of building a house from the ground up. On the other hand, if existing homes on the market don’t have enough bedrooms, a convenient location or other features your family needs, settling for one could turn out to be a costly mistake.
In addition to these more immediate, functional considerations, don’t forget to think long-term. Would you be able to retire in the home, or is the floor plan spread across too many floors? If you’re building a home, are you including exotic features (like a wine cellar or an entirely open floor plan) that will be hard to market when it comes time to sell? Are you only in the area temporarily? If so, the time and effort of building may not be worth it.
Look for competitive mortgage rates and terms
Regardless of whether you build or buy a house, you’ll still want to get the best deal you can on your mortgage. You can usually choose from fixed-rate loans as well as adjustable-rate loans, which offer a choice of terms, typically ranging from 15 years to 30 years. Some lenders also offer specialized loans for home construction that could be an attractive option if you are pursuing this path.
Carefully researching your options when it comes to buying or building a home can help you make a decision that’s right for your wallet and your family.
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